You’re probably all too familiar with budget overruns. Whichever professional services field you work in, they seem almost inevitable. Indeed, the Project Management Institute (PMI) reports that last year, 43% of projects went over budget. So, what can you do? Here are some suggestions.
1. Get Educated: PSMJ noted an interesting trend among AEC firms: There’s a direct correlation between project manager training, budget performance, and client satisfaction. Businesses who say that they formally train all of their project managers are able to stick to their budgets more often. They also have the happiest clients. On the other side, firms that have no formal training program are the worst at adhering to budgets and satisfying clients.
These results send a clear message: It’s worthwhile to learn the ropes before diving into project management.
2. Set Realistic Goals: Don’t set yourself up for failure by always agreeing to shoestring budgets and hectic timelines. Use data from previous similar projects to see what’s reasonable for your team.
If you’ve tracked all the right information for your past projects, you should be able to see your team’s performance and hours broken down into different phases and tasks. Perhaps you’ll see trends across these various components, or you’ll notice that certain employees are slower or faster than others. Put that information to use when it comes to managing your upcoming project.
3. Establish—and Track—KPIs: You may feel that you see the term “KPI” (or key performance indicator) everywhere. These are metrics that illustrate your business’s objectives, and they’re a frequent topic of discussion. Perhaps you can rattle off all of your project KPIs, but it seems like not everyone is on board yet. According to the same PMI survey referenced above, the main cause of project failure (37%) is “a lack of clearly defined objectives and milestones to measure progress.”
It’s crucial that your team reaches a consensus which KPIs you’ll be tracking, how exactly they’ll be calculated, and what constitutes success. You’ll need to log data like time and expenses on a daily basis while also looking at your billing and accounting information. Since it’s essential to check in on your KPIs frequently, you should use software that combines all the data you need and makes its analysis straightforward.
For suggestions on which KPIs to use for your project financials, don’t miss out on this ebook.
4. Plan for Scope Changes: You never want to invite scope creep into a project by accommodating too many changes, but you need to have a system for dealing with unplanned modifications.
Establish a set method for dealing with client requests. Make sure that they go through the proper chain of command, and don’t start on any changes without completely understanding why the client is asking for them.
5. Communicate Often (and Well): Poor communication is a budget killer. 18% of respondents in the PMI survey said that lack of communication by senior management was the principle reason for budget overruns, while 19% cited dysfunctional communication in general. All in all, that means that communication issues are the main cause of financial havoc for 37% of projects.
It’s important to lay out your communication processes and expectations, both internally and in between your team and your client. If you can automate or streamline anything through technology, it’s worth considering. For example, multiple stakeholders will probably need regular reports on your project financials, hours, and other metrics. It’s ideal, then, to have a project management platform that lets you schedule these reports to be automatically generated and sent to everyone who needs them.
What are your tried-and-true ways of sticking to budgets? Let us know in the comments!