Finance management may seem to be mathematical, dull, and boring but if ignored the chances that you may overspend increases. It can make a huge difference between the success and failure of the deliverables. Therefore, budget planning and monitoring are needed for every project.
Fixed vs. variable costs
Every project cost fall in two broad categories – fixed and variable. The fixed cost is easy to determine, for example, you obtained a guaranteed material quote, which will never change. The variable cost can change, for example, labor and subcontractor’s charges can increase, if hours spent in completing the task are more than expected. Therefore, it is necessary to consider all the expected cost in the finance managing software. Variable costs will need more monitoring.
Finance monitoring is crucial
On the Gantt chart, you can keep track of finances based on team collaboration. For example, you are aware that the designing project may take 100 hours. If the 100 hours include 3 months, then it can be broken down into a weekly or monthly budget. In this way, variances can be spotted at an early phase. To keep the project within budget –
- Review the budget every week, so you can stay on top. It is easy to fix a 10% budget overrun now than 40% at the end of the month.
- Ensure that every team member is aware that finances are monitored minutely. It helps to reduce the possibility of non-project hours getting incorrectly charged.
- The project’s scope needs to get managed closely because customers make a small request with ease but these results in hundreds of extra cash getting added.
Project financial management software features labor-cost forecasting. It includes every expense including capital and operational cost. The tasks get an outline in the project planning calendar, which prevents the increase of labor costs.
How detrimental poor budget tracking is?
Project management software includes real-time financial tracking. The project manager uses the Kanban board to allocate tasks to team members. The employee’s log timeline is automatically entered into the timesheet.
The accountants and project managers can monitor the labor and material cost using a budget expense tracker. Budget monitoring during the project reveals budget fluctuation on-time, which gets addressed properly curbing its adverse effect.
Unfortunately, several construction companies go over budget because of poor financial management. Other problems poor budget tracking leads to is –
- Inaccurate estimates
- Missed project scope
- Use of wrong resources
How beneficial committed budget tracking is?
Alternatively, a committed budget tracking and Scrum Board tool helps to detect issues as soon as they arise. For example, you have 20 hours budget for a graphic designer but when you check the progress on the board, it is seen that half of the ad is not done even after 10 hours.
On investigating, you discover that the designer is new, so it is taking longer than an experienced one. Fortunately, you have time to replace the new designer with a senior one to recoup the time.
If you were not monitoring real-time finances then you would not have identified this issue, which could have triggered budget overrun.
Out-of-control and overrun costs can be prevented using accurate project financial management tools. Real-time budget tracking keeps you notified about the task, finances, and time status. You will be capable to forecast timeline and cost more accurately for the whole project.