Cost overruns are all too common when managing client projects. Here are our top five tips to keep cost overruns on the low, while keeping your client and team happy:
Ensure that your client understands that a project is a shared undertaking, and that you are mutually responsible for the outcome. Be clear on:
Maintain an open and honest relationship with your client at all times. Check in regularly by phone, email and face-to-face and let them know how things are going. Share not only your successes, but also any issues and risks you‘ve come up against and what you are doing to mitigate them. Send regular updates on how your team is tracking against the estimated hours, budget, and milestones. And, if you spot even the slightest indication of a possible overrun, make sure to let your client know. It is a lot easier to justify and get paid for overruns when the client is aware of what is going on than to sort after the fact.
Unless there are few unknowns, or you have done similar projects in the past, steer away from fixed-price projects. Fixed-price projects infer that you will assume all risks and take full responsibility for all costs and resulting profit and loss and you'll need very tight project control and a robust change management process (have you read our blog article on managing project change?) to keep your project on track and costs in check.
Make sure your team has all that they need to successfully complete their work and grow in their field. Create a work environment where people are encouraged to ask for help, raise and discuss issues, and support each other. Limit the work in progress for your employees so they don’t need to context switch between projects, and be clear on how much time they have to complete an assignment so they can raise issues with you early.
Good cost control starts with good planning. Use a tool like Runn to build out your project timeline, milestones, and any people you need to deliver the work. When it comes to resourcing, make sure you choose people who have availability, the right skills and the appropriate level of experience to get the job done. Once the project is underway, constantly track progress and changes. Many cost overruns happen because project managers didn't know the project was going over budget!
Runn gives you visibility to detect schedule changes and potential resource conflicts early so you can fix issues before they boil over and manage your client and their expectations.
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Resource allocation is a critical step in the project management process. In this guide, learn what resource allocation is and why it’s important, go over some of the challenges you might encounter, and then dive into a step-by-step guide.