Avoid the Dreaded Cost Overruns Using This Simple Strategy

If you’re new to managing projects, you’re probably thinking about all the things that could go wrong.

The truth is that projects don’t always go according to plan — especially if the plan wasn’t well-thought-out to begin with.

That’s where a cost overrun usually creeps in.

A cost overrun happens when the costs associated with the project exceed the initial budget estimation.?

Read on to learn how to plan your project budget, spot warning signs of cost overruns, and deal with scope creep.

*This article is an abridged, adapted version of the blog post originally published on the Clockify blog: https://clockify.me/blog/business/cost-overrun/?

#1: Take time to plan your project thoroughly

Creating a comprehensive project plan takes time, which is why this stage is often rushed. However, rushing the project planning process significantly increases the risk of a cost overrun.

Studies investigating the causes of project cost overruns in construction projects found poor planning to be one of the leading causes. Other causes included poor communication, stakeholders’ incompetence, and price fluctuations.

The main reason why poor planning may incur additional costs is that you may have to readjust your plan along the way. This often leads to needing additional resources. To avoid such issues, plan your project thoroughly.

A well-established plan typically consists of the following:

1. Cost projection,
2. Scope statement,
3. Project schedule,
4. Communication plan, and
5. Risk management strategy.

Estimating the budget as accurately as possible is a crucial step to ensuring there are no surprises when expenses add up. So, make sure you go through all the essential stages of cost planning, including:

• Choosing the adequate team to estimate project costs ??,
• Collecting relevant data and evidence ???, and
• Determining uncertainty and risk ??.

To ensure a solid plan, create it collaboratively or at least have qualified individuals review it.

Using Clockify for time and expense tracking means you’ll have valuable data you can use to plan your next project.

The app also enables you to share reports. Therefore, you can give your collaborators access to tracked time and expenses, allowing you to come up with accurate estimates together.

#2: Pay attention to early warning signs

Despite a rock-solid project plan, the project may still run into some obstacles that can lead to a cost overrun. For that reason, be on the lookout for signs pointing to the project exceeding the budget.

Here are some examples of early warning signs of a cost overrun:

• Not reaching project milestones ??,
• Unanticipated changes in the project scope ??, or
• Breakdowns in communication ??.

You can use Clockify’s budget forecasting feature to determine whether the project is heading toward a cost overrun.

The app uses the budget estimate you enter and predicts whether and how much the project will go over budget by a set date. These forecasts are based on the billable time your team tracks and all the billable expenses they add.

Armed with a well-thought-out project plan and powerful tools for tracking project progress, you can spot cost overrun warning signs early and get your project back on track.

#3: Manage scope creep

Sometimes, the project demands change, requiring more steps to complete the project. This occurrence, known as scope creep, can significantly impact project costs.

For their 2024 Pulse of the Profession? report, the Project Management Institute investigated the effects of supportive programs on scope creep.

The results showed that organizations that didn’t offer any supportive programs experienced scope creep in 11% more projects than those that did offer such programs.?

In fact, some of the most effective supportive programs mentioned in the report include:

• Helping project managers achieve their professional development goals,
• Offering training on new ways of working,
• Arranging change management training, and
• Providing communication channels where changes can be discussed.

Changes in the project scope disrupt the team’s work process. So, supportive programs are a great way to prepare the team to adapt to sudden changes effectively. As expected, all this leads to fewer cost overruns.

Track expenses with Clockify

Apart from being a reliable time tracking tool, Clockify is also an expense tracker. Our app makes it easy for users to add expenses with all the necessary details — from expense date and amount to receipts.

Tracking expenses in Clockify gives you an accurate representation of project expenditures. That way, you’ll be aware of how much of the budget remains at all times.

Clockify’s powerful features allow you to monitor expenses and see budget forecasts that predict any possible cost overruns in the future. Therefore, it’s a handy tool to make sure your project stays within budget.

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