5 Highly Effective Cost Management Techniques

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July 15, 2019
Author: Ben Halverson
Organization: Lorman Education Service

Many businesses operate on a budget and staying within their budget is the key to project success. Exceeding your cost baseline can show poor management skills and also stretch your fiscal budget. To stay within the guidelines of their financial parameters, cost management (i.e. budget planning) is used by many business professionals. In fact, cost management can also be used as a tool to reduce your project costs. 

     What Is Cost Management? 

Cost management is the culmination of meticulous financial planning. The Project manager estimates the entire cost of their project at the task level. Today, it's essential for businesses that provide a service to give their clients the least anticipated costs to have a jump on the competition. As the one providing the service, your role is to help the business avoid exceeding their budget. Cost management also helps you avoid overcharging your clients which could reflect poorly on your reputation and cost you money. More importantly, cost management is a huge resource for small businesses and start-ups. 

       5 Proven Cost Management Techniques 

Start With A Strategy 

Every project should start with a strategy. Your business professionals have to come to the round table and agree on what's needed and how it will implemented on any given project. For example, understand the difference between fixed and variable expenses to make the most out of each project. In fact, your strategy should include a project outcome that's consistent among your organization and your client. Consider starting your project with the following strategy goals: 

  • project goals 
  • project scope 
  • milestones 
  • work breakdown 
  • budget 
  • risk management 

Resource Planning 

Before the initial start of your project, it's important to include resource planning that includes the work breakdown model. This is where the estimation of costs is analyzed for all project deliverables too. The full cost of how much it takes to complete any project should be thoroughly assessed to ensure the successful completion of your project. At this stage, professionals should have a clear grasp of their complete business processes. In fact, allocate your human and non-human tasks to maximize the costs of your project. This will give you a clear overview of the level of availability and capacity of how you can extend your funds. 

Plan For The Unexpected 

Expect the unexpected to arise with any project. Successful cost management techniques require professionals to set aside a budget for emergencies and anticipated expenditures. At this point, businesses can set aside emergency funds or create a backup budget. Never assume that more expenses won't be needed for future project costs by planning successfully managing your funds to include the unexpected. Cost management could mean securing insurance for some businesses to include the cost of a natural disaster. 

Reduce Fixed Expenses 

It's true, it may be hard to keep track of fixed expenses, but that doesn't mean your business can't keep a watchful eye and cut back where it's feasible. For example: 

Downsize where possible. Simplify and consolidate your project expenses. 

Outsource where possible. If possible use outsourced workers to save on the cost of in-house employees. 

Utilize Energy Efficiency. According to Energy Star, "you can reduce your expenses by 10 to 40 percent" by turning off electrical or gas powered equipment, maximizing daylight hours, or using task lighting when possible. 

Utilize A Budget 

Categorize your tasks to determine what's needed for each project and plan accordingly. A detailed estimation of the costs will help you give you meet or stay within your financial goals on a given project or task. Understanding your cost structure is the key to a successful project. Your budget will show you how much money you have allotted to complete any project according to the Balance Careers. 

Remember, cost management strategies can be applied to many projects. In fact, it will ultimately determine the success of your project. 

If you're interested in learning more about cost management techniques for your personal or business finances, you're invited to contact us at Lorman to schedule a free consultation today! 

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