Why is project cost significant for Project Managers?
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As correctly said by Joe Biden, “Do not speak with me what you value, show me your cost, and I’ will tell you what you value.” As a project manager, it is an expected elementary quality to manage the projects within the project cost. Most of the times, project managers are evaluated on the basis of the number of projects they have finished within the project cost.
In this article mostly we would like to showcase about project cost, how it is important, what is cost management and the effect of the total project cost. We will also learn how to manage the project cost and how to eliminate the risk.
What does Project cost?
A cost necessary to procure all the needed services products, and resources to finish the project successfully.
For Example: Consider an example of a construction project, the cost planning starts from land purchase cost, building cost, materials cost, administration cost, employment cost, and other direct and indirect costs. Now you are aware of what is project cost. Further, let us look at why the project cost is important.
Why it is important?
No project starts without an estimated budget. Project achievement is decided by how well the project budget has been used in the project. Many times it occurs that, the project might not be finished within the project budget. It means that when equated the Project Cost and Project Profit, Project Cost may have exceeded and it is of course measured as a project disaster.
So it is very vital to come up with the accurate cost estimation required for the project. To come up with correct cost planning, it is requiring thoughtful the types of project costs including in the project.
To create a suitable amount of control over the cost, a project manager must workout strict cost supervision. In other words, they have to be aware of where budgets are allocated at all times and if anything needs to modify to meet the set cost. Project managers should never be jammed with going over budget unpredictably.
Eventually, the subset of all project management is cost management. If you are not able to manage simple costs, you will have an even tougher time handling critical projects. The capability to control the budget means a project manager must be able to recognize the source of costs, to begin with.
The following are a few points a project manager must keep their eye on when working effectual cost management:
- Original budget
- Current approved cost
- Forecasted vs. Actual cost
- Committed cost
Once a project manager is aware of the areas to watch there are also a few techniques they can use to stay on track.