Information about Nova

Since 2005, we have handled over 1500 offshore projects for clients from US, UK, Australia and  Europe and have built a good reputation for doing solid, disciplined software outsourcing  work that is delivered within schedule and budget.

Why and How should PM control budget

source from: internalpublish date: 2024年4月7日

Why should cost control be conducted?
The existence of a company necessitates considering profit margins, otherwise, it cannot survive in intense competition. Cost control is the “saving” part of “saving and spending” to achieve project goals at the lowest possible cost. As the person in charge of the project, project managers need to focus on controlling costs throughout the project process and prioritize completing the project within budget.

Misconceptions about cost control
2.1. Misconception 1: Shoddy Workmanship
Cost control aims to achieve agreed-upon results, quality, and deadlines within the expected cost range. If the project scope is to deliver a rough house, then delivering a rough house is acceptable. However, if the goal is a furnished house and only a rough house is delivered, even though it reduces costs, the objective is not met.

2.2. Misconception 2: Short-Term Profit Orientation
Many people believe that cost control means cutting corners and just getting things done with the allocated money, without offering any constructive suggestions, which is short-sighted. For example, during the product development process, ignoring potential issues with the chosen solution may lead to two scenarios:

  1. Using a better but more time-consuming solution directly, which is incorrect because without discussion, what if this solution also has flaws? How much will it affect the project schedule and costs? These aspects need to be discussed.
  2. Not considering better alternatives and just focusing on current tasks. This is also wrong. We should aim higher and not just focus on immediate tasks. The correct approach is to propose better solutions and let the company decide whether to incur additional costs. If it’s indeed a good solution, trust that the company will make a reasonable trade-off between short-term gains and long-term value.

2.3. Misconception 3: Giving Up Easily
In some projects, when encountering various situations midway, project managers may give up on cost control, allowing the project to deteriorate further.

How to effectively control costs?
When revisiting projects with cost overruns, the PMO has summarized the following points:

3.1. Emphasize Cost Baseline (Initial Estimate)
Accurate initial estimates are crucial for project success. How to do it:

  • Detailed task breakdown based on requirements and comparison with quotation tables.
  • Communicate with quoters about unreasonable items (some quotations may be low due to agreements with customers).
  • If re-estimation exceeds the quotation, consider terminating the project.
  • Reserve risk buffer time: Many variables occur during the project, and without buffer time, it’s easy to exceed costs.
  • Reserve time for management, testing, and bug fixing.
  • Allocate tasks with some slack to avoid exhausting resources at the beginning.

Once the cost baseline is established, PMs must remember it at all times and not allow it to be exceeded arbitrarily.

3.2. Cost Monitoring
Utilize tools and communication to grasp the real cost situation of the project and intervene promptly in abnormal situations.

  • Analyze abnormal cost data promptly.
  • Review member task details and check for anomalies in status and hours.
  • Monitor whether members estimate their own hours.
  • Ensure sufficient member hours.
  • Attend stand-up meetings to understand task progress.
  • Intervene early in case of task delays and identify root causes for intervention.

3.3. Scope Management
Cost control also relies on scope control. For instance, agreeing to customer requests outside the scope easily leads to project loss of control.

  • Handle minor changes with buffers if the impact on hours is minimal.
  • For major changes, apply for cost adjustments and maintain corresponding records.

3.4. Team Member Management
Understanding team members and assigning suitable tasks are crucial.

  • If a member seems unsuitable for the project and productivity is low, request a replacement or additional budget.
  • Match tasks to members’ abilities.
  • Support less capable members and emphasize estimation and communication before development.
  • Intervene in testing early to expose quality issues.

In summary, cost management should be emphasized. Whenever there’s a change in cost analysis data, PMs should understand what happened and address it specifically instead of allowing confusion to persist. Issues that are not understood should be raised for discussion.

Contact Us

Send us your message
Complete the form below and send your message to us.
We'll answer you as soon as possible.
Thanks for visiting!
Get In Touch
Copyright © 2005 - 2024 Nova Software Inc. All Rights Reserved.