On most projects, actual expenditures are tracked and reconciled on a monthly basis, since most companies only provide accounting reports monthly.
Let's say you've been doing that but that you've just realised that you're tending to go over budget. It may not be time to panic, but you don't want to ignore the situation either. Here are some proactive techniques you can use to get back on budget as quickly as possible.
1. Swap people
If cost containment is more important than the deadline, you may be willing for the work to take a longer time if it ultimately can be completed successfully at a reduced cost. This technique could also be used to replace a contract resource with an employee resource, if the employee would end up costing less for your project.
2. Eliminate or reduce non-labour costs
Just as with people, it may be possible to utilise less costly materials, supplies, or services than those originally budgeted for. For instance:
- You may ask project travellers to stay at a discount hotel chain instead of more upmarket accommodation
- You can see if team members can utilise existing, upgraded hardware instead of new machines
- You can substitute less expensive computer-based training, or team mentoring, instead of formal training classes
3. Implement "zero tolerance" scope change
You must ensure that no unplanned work is added to your project unless formal scope change management is invoked. This doesn't mean you won't do the extra work. It means that you need to receive incremental budget for all new work you add to the project.
4. Work unpaid overtime
This option only applies, of course, if staff do not get paid for overtime. If you're getting towards the end of the project, you may be able to issue time off from work in lieu of overtime pay after the project is completed. However, this is usually not a good solution if you have to apply it for a long time.
5. Use budget contingency (if you have it)
Your company may allow a budget contingency to account for the uncertainty and risk associated with your estimate. The contingency is separate from the project budget. If you're tending to go over budget because of estimating errors, you can tap the contingency budget.
6. Improve processes
On longer projects, you can look for ways to streamline project processes. Work done more efficiently takes less time and costs less.
7. Renegotiate external contracts
It may be possible to renegotiate licence and contract terms. If you use contract labour, you might be able to negotiate a reduced fee. Perhaps your software vendor will take less money for their product. In many cases, the vendor will be willing to trade off one benefit for another. For instance, a contract resource might reduce his rate in exchange for additional work hours. Perhaps a vendor will take less money in exchange for getting paid earlier. If you're over budget, especially on a large project, all of the vendors should be reviewed for potential cost savings.
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8. Scope back the work
If all else fails and you're not able to get additional budget relief, you may need to negotiate with the client to remove some of the work from the project. There may be options to complete this project on budget with less that 100 percent functionality, and then to execute a follow-up project to complete the remaining requirements. This isn't the place to start getting back on budget, but it may be your final option if all other techniques fail or are not available.
