What is Project Cost Management? – Definition, Process, And More

Why is Project Cost Management important? Most projects, especially those that are large and complex, are very difficult to manage. Without proper budgeting and estimating techniques, any budget can easily go out of control and become unmanageable. For the project manager, budgeting is an essential step in the process of managing any project.

How do you know if your budgeting and estimating techniques are working the way they should? If you’re not using good estimating techniques, you need to find out why you’re not getting an accurate estimate. So, how important is Project Cost Management to your budgeting and planning activities?

First, the way to understand how critical project cost management is when managing an over-all project is through doing a thought experiment. Let’s look at how an over-all budget with all the different task levels in it would work without using cost management. In this example, all the different costs associated with each job level would be reflected in the total budget.

When you’re simply using project cost management as a method of managing the overall budget, you’re missing out on a lot of the complexity of the project. To illustrate this, consider how to effectively manage a major project, such as the redesign of a government building or airport. First, you must collect all the information that will help you make a good decision about what features you want and how much money it will cost to do it. Next, you must plan for all the contingencies, such as what might happen if you overestimate the cost of the project. Finally, you must control costs to ensure that you aren’t paying more than you have to.

But the real power of managing project costs comes from how you can use this information to make better decisions about what features you should include in your budget and how much they should cost. One example is doing a search for a new government building. You might find that it would cost more to build the facility than originally estimated, and you’ll also come across several unexpected costs associated with the project. If you had correctly planned for these factors, you could have saved a significant amount of money.

Controlling costs throughout the life of a budgeting project is often much more difficult than it seems. While it can certainly seem simple to just pencil in a few figures for start up costs and an estimate for the life of the project, when it comes to controlling project costs throughout its lifespan, you really need to pay attention to how the numbers are derived. This is where the assistance of a budgeting software becomes invaluable. Budgeting software not only allows you to easily track costs throughout the budget using simple bar charts and line charts, but it also helps you make smarter decisions about what features to include and how much they should cost.