Cost monitoring is not just a mandatory stage of project management, it is a key tool that determines its success and leads to the achievement of set goals. A lack of effective monitoring can lead to a variety of problems, including budget overruns, schedule delays, and poor quality results.
So, why can a lack of cost tracking could destroy your project?
1. Exceeding the budget
Without proper tracking of project costs, it becomes difficult to know how much money has been spent and how much is left over. This can lead to unpleasant surprises when the project has to be stopped suddenly because you have run out of funds. Or you need to cut corners, which will lead to an uneven result. Or you may find yourself in the awkward position of requesting additional financing.
2. Improper management of one's resources
If you don't track your spending, you're more likely to make bad decisions. For example, it's a good idea to readjust your finances a few times throughout the project as you get a better understanding of it along the way. But, if you don't keep track of the budget, it will be difficult for you to do this. This often results in an imbalance of finances where one department may be overfunded and another underfunded. Ultimately, this means wasted time and money.
3. Lower profitability
If the budget is exceeded, you may incur part of the costs for the client. This will negate any markup you set at the start of the project and reduce your profit. Even if the customer fully covers the costs, this is bad news for you because they will be dissatisfied and may choose another partner in the future. Again, this means lower profits for you.
4. Difficulties in forecasting
If you don't know where the money is going, you can't accurately assess how you're doing in terms of resource utilization. Also, without knowing your actual project costs, you also can't accurately estimate when the next project will come up, and you'll continue to struggle with budget tracking.
However, there is good news! You can avoid the four risks described above simply by tracking your spendings. When you know where resources are going, you can be confident in your budget, use resources better, increase profitability, and then do it all again and better with the next project. This is good news not only for you, but also for your partners. This way, they will know that they can rely on you and will be more satisfied with your work.
How to start managing project costs?
You can use simple spreadsheets or special expense management software. Yes, you can get by with one Excel spreadsheet – and if you're a freelancer, you probably don't need anything else. However, specialized software will certainly make it easier to track and oversee your expenses, offering an easy way to enter them, as well as various reports for analysis.
Some things are easy to track down. For example, ongoing and predictable costs, such as regular subscriptions to some tools used in the project. One-off costs are also understandable, as you can just add them to your sheet and forget about them. But the most difficult thing is to track labor costs. Different salaries, changing team members, different departments – it can all get messy. Even solo freelancers can face this. That's why it's a smart idea to consider expense management software or other tools that can help you with this.
A simple tool for tracking expenses is Yaware.TimeTracker
Yaware.TimeTracker is a time and productivity monitoring software. It not only helps to monitor the time spent on various tasks and projects, but also helps to control and analyze costs.
Yaware.TimeTracker helps businesses and teams better understand how their time and resources are being used, helping to avoid overspending and improve productivity. Here's what you can do with this tool:
- what time of day is most productive for employees;
- what resources are used by employees to perform a specific task;
- how much time is spent on the task;
- when there are difficulties in performing a task and you need help;
- which distracts employees and prevents them from moving forward.
Want to start using Yaware.TimeTracker? Sign up right now.
Moreover, Yaware offers 14 days of free use of the program so that you can experience its functionality to the fullest!