Originally published on 9/9/2015 & updated on 11/30/22
As a Project Manager (PM), you already know that ensuring the success of your projects is a primary concern. But this can be a tough task. Even if the project is creatively brilliant and delivered on time, a project that goes over budget can cause a catastrophe. So…
How do you track a project budget?
To help control your project budget—and prevent costly mistakes—refer to the following seven methods for tracking project expenses:
1. set up an online system
Project budget tracking is made way easier (and some would say it’s the ONLY way) with a project management budget tracking tool. When you have robust software taking care of your budget, not only will you be able to track project expenses without things falling through the cracks, you’ll save all the time you would have spent manually plugging in data, and spend it on billable work instead.
The major advantage of having your project expense tracking software online is that you can keep track of your budget whether you're in the office, traveling, or at home.
2. CREATE A BASELINE
After you’ve created your project’s schedule, it’s important to implement a scope baseline that can be used to track your tasks and project performance. Baselines provide PMs with a set of stored values for your project, including:
- Original Scheduled Start and Finish Dates
- Planned Efforts
- Estimated Costs
- Budgeted Revenue
Having an outlined plan helps provide accurate comparisons between your initial schedule and the actual progress of your work and your project’s earned value calculation.
3. FORECAST THE BUDGET
Accurate budget management, including consistent re-forecasting, helps keep projects on track. Project costs and project budgets are two different entities. With this in mind, it’s important to identify your project costs and outline potential risks.
Revisiting your budget prevents things from getting too far out of hand. Revenue forecasting software can help monitor financial budgets, as well as streamline the process by automatically creating and updating budget forecasts.
4. OUTLINE RESOURCE USAGE
Much like your budget, it’s important to constantly monitor your resource usage—after all, the people working on your team contribute to the overall cost. It’s crucial to review the number of people working on your project on a weekly basis to ensure that you are utilizing your resources. Consistently revisiting your resource usage helps give you an accurate status of your schedule and budget.
The next question to ask is:
How do you monitor and control a budget in project management?
5. put someone in charge
Once you’ve figured out what your budget is, it’s essential that you make someone responsible for staying on top of it. This person’s job will be to raise the alert immediately if a project is going over budget.
6. MONITOR YOUR SCHEDULE
Monitoring the project’s schedule performance provides PMs with indications of activity-coordination problems, resource conflicts, and cost overruns. Consider implementing a work breakdown structure (WBS) to organize your team’s work into manageable sections. The WBS deliverable is designed to break down a project into manageable chunks that can be estimated and supervised, making it simpler for PMs to assign and manage individual responsibilities.
7. MANAGE SCOPE
Scope creep—uncontrolled changes or growth in the scope of a project—is one of the leading causes of project overruns. This typically occurs when the scope of a project is not accurately defined, documented, or monitored.
Here are some tips on controlling scope creep:
- Make sure you understand the project’s vision—and that all project drivers and stakeholders are on the same page.
- Understand your priorities and outline your budget, deadlines, delivery, client satisfaction and employee satisfaction.
- Define your deliverables.
- Assign resources and determine a critical path using project evaluation and review techniques (such as the aforementioned WBS).
- Plan for scope creep—but implement methods to respond to potential risks.
By monitoring scope, PMs can ensure that they are controlling their projects, instead of the projects controlling them.
8. TRACK IN REAL-TIME
This is where a project cost tracking tool comes in super handy. Excel is useful as a project budget tracker, but only up to a point. It can't, for example, give you real-time updates and let you know the moment you have gone beyond the budget. The beauty of a budget tracking project management tool is its ability to show you exactly where you're holding without you having to do any number crunching or guesswork.
How Can Workamajig Help You With Project Expense Tracking?
- Convert approved estimates to budgets, see estimated profits & track actuals against budgets in real-time
- Budget or timeline at risk? See all items needing attention in one place with project warnings
- Get notified of budget issues related to vendor costs & reconcile vendor invoices to easily spot discrepancies & make informed decisions.
- Know exactly where your project stands with budget breakdowns by item, type, task, or person
- See the big picture with view, filter & drill-down options across multiple project budgets
- Stay ahead of the curve with customizable budget status notifications & health meters