2. The financial management aspect of project management can be
challenging - there is no question about it. I just read about one
government project for the state of Pennsylvania with IBM that is
being cancelled after going 57% over budget on a $107 million
project. That's a little extreme, but it truly is easy to let a project get
out of hand if the budget is not watched carefully. And I'm not even
considering the hundreds of other factors that can come into play to
affect a project's financial health.
First let's talk about project success and what is generally acceptable
in terms of coming in over budget. What's the threshold in your
organisation? For me and the organisations I've worked with and
for, a budget overrun of 10% at the end of the engagement has
always been within the acceptable range. With some organisations
it's been even higher, but I try never to set my bar so low that I'm
striving for some level of mediocrity. So let's focus on that 10%
number...does that sound about right for your organisation or PMO?
3. Watch it closely and keep it at 10%
I'm of the mindset that most projects can recover - if necessary - from a 10%
budget overrun. It may take some creative management and some help from
the executive team and possibly the customer, but it can usually be done.
And if you're managing the project budget like you should be - forecasting
and reforecasting every week by plugging project actuals obtained from
accounting so you know where you stand every week - then ensuring that you
never go beyond that 10% overrun threshold should be fairly easy to stick
to...barring, of course, some unforeseen catastrophe.
So, let's assume you've been watching the project budget closely as you should
be and your project is running right around 10% above the forecasted budget.
You've mapped it out through the end of the project based on what you know
right now and it appears that you're still likely to wrap the project up at 10%
over budget. What can be done now to bring that back down closer to zero?
After all, we want to do what we can to rein the budget back in - you never
know when unforeseen circumstances or issues can come up close to
deployment that can cause you major project financial issues. Therefore, you
want to keep it as in check as possible in case you hit those issues late in the
project and are left with no time to take any financial corrective action. Try to
take it now. What can be done? Here is my list of 3 key things that you may
be able to do mid-stream on the project to help get that project budget back in
line with the original plan...
4. 1. Look for Potential Change Orders
This is a hard one because customers don't like change orders.
However, if you can see some change order opportunities, you may
be able to price it so that the profit margin on that work is a little
higher. Therefore, if your estimates are good on the change order
work, it will up your revenue AND your profit margin and help bring the
project budget back into alignment. You'll be surprised what a couple
of those change orders will do to your project's financial health.
5. 2. Offload Any Unnecessary
Resources
If you have a resource still on the project who has little to no forecasted
effort or tasks left on the engagement, cut them loose. They are likely
still charging a few weekly hours to your project and that will kill your
budget quickly.
6. 3. Spend Less PM Time on the
Project
Finally, one action that I've found to be effective is to step back as
much as possible and charge less project management time to the
engagement. My time is usually the most expensive time charged to
the project in a professional services organisation, so decreasing
my time on the project by just 4-5 hours a week for the rest of the
engagement can make a big difference. If I can do it and still
maintain the proper oversight of the project, that's a likely course of
corrective action for me.
7. For more information, have a
look on the below link
http://certifications-review.blogspot.in/2013/10/my-budget-is-10-overnow-what.html
