The process of planning and managing a business or project's budget is known as cost management. In the case of a project, it assists the project manager in estimating the project's cost and establishing controls to reduce the likelihood of the project going over budget.
An Overview of Cost Management
The cost management process begins during the project's planning phase, when executives approve the costs before they are implemented. The expenses are then carefully monitored and recorded during the project's execution to ensure that they are in line with the cost management plan.
In project management, the triple constraint refers to the three metrics that define a project: cost, scope, and time. If you focus too much on one aspect, the other two will suffer. As a result, the triple constraint is at work in cost management.
Main Considerations for Cost Management
Whether it's materials or people, a cost management strategy must account for all of the variables that affect the budget. Fixed costs exist as well, such as the economic cost of teams. All of these must be calculated in order to determine your financial commitment to the project.
Last but not least, there is the stakeholder, who has a financial incentive to keep costs low. Cost overruns are a common occurrence in many projects, but they are not tolerated well by stakeholders. When developing your cost management strategy, keep the stakeholder in mind. Throughout the project, they must be kept informed and receive reports.
Why Is Project Cost Management Important?
A thought experiment is the best way to see how important project cost management is when managing a project. Consider how a project functions with and without project cost management.
When you use project cost management, it establishes a cost baseline for your project. That is, it directs the decisions and actions you take when managing project costs. This allows you to stay on track with the project without going over budget.
The organisation may lose money if project costs exceed profits if project cost management is not implemented. Another issue is that you may invoice your customers incorrectly. All of this leads to a haphazard budget and a dangerous inability to recognise when you've gone overboard.
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