Most of us are all too familiar with budget overruns. We’ve all had those projects that end up over budget, and we’re left wondering why. Keeping projects on budget is extremely important for overall profitability and even employee morale. Here are six strategies to keep your projects on or even under budget.
Set a realistic budget in the beginning
One of the best ways to create an effective budget is to look at the expenses from past projects. If this is the first project with a given client, review your budgets from similar projects. If you have worked with a given client before, review past budgets to anticipate potential hiccups.
Avoid scope creep
This term refers to uncontrolled growth or changes in the scope of a project. Although it is common to have some aspects of a project change once it is underway, it is helpful to create a process for changes and to have your team skilled in this area.
Create a framework to communicate changes from the client and help project managers keep the end goal in mind. This is essential for properly budgeting your team’s time and keeping the project moving forward.
Track staff time
In most firms, your team is your most valuable asset. Because many staff are salaried, some firms don’t closely track staff hours. It is hard to know how profitable certain clients and projects are without knowing how time is allocated.
With the right software, time tracking is nearly effortless. After implementing practices for tracking time, many firms discover that seemingly profitable clients are not. Tracking staff time is often a missing ingredient in creating realistic project budgets.
Know your effective bill rate
Most firms cannot bill for every hour of time and calculating your effective bill rate highlights this fact. Let’s say a member of your team worked 40 hours last week but only billed for 30 at a rate of $100 an hour. This means that your effective bill rate is $75 because it takes the non-billable time into account.
Knowing your effective bill rate makes it easier to accurately price jobs and create budgets. If specific clients or types of projects require a disproportionate amount of non-billable time, price the work accordingly. There are software solutions that can make this process simple and easy.
Use project accounting practices
Unlike traditional accounting, project accounting measures the financial performance of specific projects. It requires collecting key data throughout a project, such as time and expense information. Project accounting provides real-time data, giving firms the financial insights they need to thrive. In many cases, small decisions at key times can have a big impact on staying within a project budget.
Utilize comprehensive project management software
More than ever, software solutions are providing valuable business insights for project accounting and project management. Such tools help pinpoint where projects are going over budget and give project managers the structure they need to strategically utilize their teams.
BQE Core is an innovative project management software with time billing, project accounting, and expense tracking. It is a valuable tool in tracking staff time and calculating key performance indicators, such as your effective bill rate, utilization rate, and profitability.