Money can be stressful.
Let alone when you're trying to track money
on a project, ugh.
Well, I'm going to share with you some of my techniques
on project cost management to help you on this.
Now, if you really want to master
your project management skills,
stay tuned to the end of this video
'cause I'm going to share with you how you can get your
hands on a guide on how to ensure your projects don't fail.
Hi welcome, my name is Adriana Girdler
and you've landed on the best practical
project management channel.
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Now, on that note,
do you want to learn more about project cost management?
Well, let's get to it.
What is project cost management?
Well, project cost management is the process you use
in order to manage and control and monitor your costs.
This includes estimating, budgeting,
controlling of the costs that were given to you
for you to execute the project.
And project cost management
is ensuring that you stay within those boundaries.
Why does cost management matter?
I hope that doesn't sound like a really silly question,
but you'll be surprised.
Some people don't actually even understand
what their budget is for their project.
And it does matter, because in project management
it's all about your scope, time and budget.
Now, if you're not managing your budget
or you're not understanding what your costs are,
it can really have a huge impact on your timelines.
Because if you need to have,
do more things you may have to extend your timeline.
It's a big impact when it comes to risk
because you may need to have,
you may have some risks that pop up
and you need some contingency planning
but that contingency planning may be linked to monies.
So you can't do it 'cause you don't have a budget
or you don't understand your budget
or you may have to rearrange things
and maybe do things slightly differently,
but are still within scope.
But because of budget, it's dictating you to do that.
So understanding your budget whether you manage it or not,
because on some projects a finance person
maybe managing that,
but they have to be working with you so you can understand
what exactly do you have left, how much is given.
So you can understand it in the greater picture
of managing your project
and the other elements that pop up, right?
So that becomes important that you understand that,
as well as it's important for resourcing too.
Okay, let's get the first most obvious thing
that you do with cost management out of the way,
that is track your spending.
Okay, that's a given you have a budget,
it doesn't magically get tracked on its own,
someone has to track it and that's what you need to do.
It just allows you to understand here's my baseline,
how much have I spent to date
and where are we in the project timeline
and what do we have that's being called out against it.
And are we okay
or do I need to actually go and ask for more monies?
So that tracking your spending
becomes a very critical activity
that you have to do for project cost management.
Maintain good time management.
What Adriana we're talking about project cost management.
I'm like, yeah, I know,
that's why I'm telling you to maintain
really good time management.
What did I say earlier on about scope, time and budget?
These are all linked.
So you really need to, as part of your cost management
is really have, it's to have really good time management.
Time and money go together.
If you extend your project time I promise you,
you need more money in order to help you do that.
So it becomes really important
that you keep not only track of your spending,
but you keep track of your timing
because there is a direct correlation and relationship
between the two.
So really good time management
also equates to really good budget management.
Plan for contingencies.
Okay, with cost management within a project.
As I said in the earlier tip, things are going to pop up.
You need to ensure that you have contingency planning funds
in your project budget.
And you need to understand
that from a risk perspective of your project
because if you're doing really good project management,
you're doing some initial risk assessment,
and we have mitigation and contingency plans
for risk assessments.
In fact, what we want to do is if risk does come to
fruition, what do we have to do to minimize that impact?
And I wish to say things were free and they're not,
there's usually some sort of cost associated with it.
So you need to ensure that,
with your good contingency planning
that you're linking it to your budget.
So you know what you need to ask for,
or rearrange within your current budget
to cover that particular contingency.
Have a change control strategy.
This to me is critical on any project of any size,
is how are you going to manage change?
'Cause a lot of times
without you realizing hallway conversation a manager says,
hey, can you just add this to your project?
They don't understand that simple request
could increase your budget, could increase your time,
oh, my goodness, then what?
So you need to have an understanding of how to manage change
and there's change control that you can implement
which is directly tied into your budget.
'Cause you can nip things in the bud so they don't snowball
into an additional activity that you didn't plan for.
You now need resources against,
you need either maybe some software,
some activities that have to occur
and it's not within your budget, then what do you do?
Oh, my goodness, that's the last thing
you want to manage your budget, right?
You want to keep it to the original cost
that you were given ideally,
unless something happens like a big risk
and that's a different story.
But that all being said,
really having a good change control strategy,
a way of working so you can monitor
that when something does come into play
how are we going to deal with it,
so that you can be on top of that budget
and keep your project running.
Project resource review.
Projects do not happen on their own.
There's no AI, Artificial Intelligence
that can execute a project, you need people.
So I leave this last because I've had to help with budgets
and estimations all the time.
And we always look at resourcing and I struggle with this,
and maybe some of you struggle too.
If you have put in the comments below,
give me your stories, 'cause I struggle with this.
I know why resourcing is looked at because you can estimate
the amount of time a person's going to be on a project.
But my struggle is this,
when it comes to external resources
like you're hiring another organization, a consultant,
a firm, whatever they have to do a standard of work.
And in that standard of work,
it's usually laid out in good detail
what they're going to be delivering to,
so that cost is pretty much locked in.
And usually if it's going to exceed that cost,
there's a negotiation that happens.
And it's usually because there's an additional activity
that's being requested from them.
So I find managing resources externally to an organization
it is actually quite easy and simple to do,
because of that process of having that standard of work.
What I struggle with,
is when I'm asked to estimate internal resources.
Well, number one,
companies don't make their internal organization individuals
to do an SOW, statement of work
on the project they're going to do, nobody does that.
If company does let me know, I've never come across it,
and I've worked with a lot of companies
and a lot of big organizations.
So then you're doing this, hmm,
what do I think it's going to be?
And so you're usually at the beginning of the project
when you're doing these type of estimations as well.
So you're haven't even come across issues in the project yet
that may need someone's more time.
So a lot of time I kind of guess, I think it's about 25%
but here's the magic word
that I now do when I'm asked to estimate on resources,
it is an average across the whole project.
There may be, and this is my little disclaimer, I tell them,
there may be times I need that person 50%
for this short period of time.
And maybe I only need them 5% for the rest of the time
or in certain bits and pieces but the average may be 25.
So I struggle because sometimes people will go,
you said it was 25% and I'm like, well,
I didn't account for this other stuff that popped up
that's project, you know, one on one risks happen,
things change, they evolve.
But that is something that,
when I do have to do resource loading
and looking at that from an estimation standpoint,
go higher than what you think you're going to go.
Because I promise you it's going to have happened,
you're probably going to have to use that person
a little bit more than you anticipated.
So always going up and patting it a bit,
is just going to help you in the long run.
Now, that you know how to manage project costs
and some of the techniques,
oh my goodness, I'm going to get to it.
I told you it stay to the end, and what do I have for you?
Free my gift to you.
How to identify the top 10 project mistakes
project managers make?
Because this will definitely derail your project
and potentially add more costs.
So something you want to avoid for sure, for sure.
Where can you get this?
Well, it's under this video in the link below, check it out.
Until the next video, see you later.