- Managing your budget as the project happens
can be more challenging than expected.
Understanding the data you collect
to ensure your project status is accurate is essential.
Let's talk about data sources and the analysis required
to ensure you produce accurate budget reports.
Labor hours are often the most significant project cost
and the cost data that's the most problematic.
Finance organizations often use accounting months,
which don't match calendar months.
Also, finance departments rarely release
the hourly pay rates of individual employees.
So a generic rate per pay grade
must be used to calculate costs.
Finally, sometimes monthly cost data
is provided the following month,
which is too late for project managers
to proactively manage their projects.
Given these situations,
you must understand the characteristics of labor hours
and the cost data you'll receive.
And understand that sometimes it may be easier
to do your own hours worked tracking and cost calculations
and the information you get from finance
may not be suitable.
When invoiced on a time and materials basis,
contractor or consultant costs are straightforward
to using your budget.
It can be more difficult
than when you have a fixed cost contract.
In this case, you must create an agreement
for when costs will be applied to the project.
I've seen two prevalent approaches, milestone payments
and applying costs when contractors complete specific tasks.
Talk with your vendors and stakeholders
and decide how you should handle these costs.
Many organizations apply overhead charges to projects.
This recovers the cost of senior management,
buildings, and other expenses.
Overhead is usually used for hourly labor costs,
but other methods are also possible.
Understanding how overhead charges apply
to your project is vital so your cost reports are accurate.
Finally, there are items to review
when you buy materials for your project.
These can be computers for an IT project,
construction materials, or other things.
It's straightforward if you buy materials
through a specific purchase agreement for the project.
However, getting materials through a volume agreement
between your company and a vendor can take time and effort.
Work with your finance department to understand
how costs will be distributed to your project.
Also, if you draft a tender to get a product or service,
consider the cost of preparing the bid package
and reviewing vendor responses.
Doing some homework on the cost data for your budget status
will help enhance the accuracy of your budget reports
and how you're perceived as a cost minded project manager.