Do you know how to calculate the cost of a project? Learn how to perform this activity correctly and ensure better results for your company!
Calculating the cost of a project is a task that requires a lot of organization and focus. The process must begin with a well-structured strategic plan and budget. After all, they are essential to avoid delays, unforeseen events and losses in carrying out activities.
With good management, a properly prepared schedule and systematic monitoring, it is easier to deliver the project on time and within budget. This also helps to ensure the satisfaction of the company’s customers.
Want to know how to create a more aligned budget? In this article, you will learn how to calculate the cost of a project efficiently.
Keep reading and learn!
What is project cost management, and how does it work?
Cost management includes a series of procedures to ensure that the project will be completed within the budget approved. Among these is the calculation of the cost, including several factors applicable to the business proposal.
This makes it possible to reconcile the financial resources that the project requires to be executed with those that the company is willing to pay. In addition to expenses with human and material resources, cost management also considers the consequences of investing in these factors.
If human capital expenditures are reduced, for example, this can result in operational failures. Furthermore, these problems may take longer to be discovered, jeopardizing project completion.
Finally, it is worth noting that good management does not only involve estimating costs and determining the budget. It also requires controlling expenses. This way, it is possible to prevent the project from having higher costs than expected .
How important is it to calculate the cost of a project correctly?
As you have seen, calculating the cost is one of the main steps in executing a project. After all, without good expense management, it is common for the proposed budget to be different from what was expected, resulting in problems in the future.
Even if a project is delivered within the requested scope, quality and deadline, if it goes over budget, it can lead to financial difficulties. After all, wasting resources or spending them at inappropriate times can harm the company’s budget.
Therefore, the sooner the financial costs are calculated, the better for the project. Management must therefore plan, estimate, determine and control expenses. The goal is to ensure that no step is forgotten and to enable the preparation of a budget that is closer to reality.
Remember that this is an instrument that serves to support managers’ decision-making. Therefore, it should not be seen simply as a bureaucratic obligation that the financial sector is required to prepare, but as a tool that helps the business succeed.
Another advantage of calculating project costs is having a view of the costs of each activity. This way, it is possible to verify expenses and justify why resources were invested in certain operations.
Furthermore, cost control allows the company to assess lessons learned at the end of the project. This information can be used to prepare budget documents that will optimize future projects.
How to calculate the cost of a project?
After understanding the importance of calculating the cost of a project, you need to know what to check and how to arrive at the result of the amount that should be invested. To do this, there are some tips that can help.
Check it out:
Make an initial plan
Planning initial costs is the basis of any project. This includes raising questions such as the need to outsource services, the number of steps to be followed, the tools available to meet demands, among other factors.
Therefore, it is essential that cost planning is detailed. This helps to ensure that the pre-determined budget will not be exceeded. To this end, it is also necessary to gather information on the prices and quantities of each element involved in carrying out the project.
Estimate the costs
The next step is to make an estimate of the overall fees. For this step, use the values obtained within the preceding step. Also, invest in accurate financial analyses, which permits you to have a fairly approximate concept of how lots the undertaking will value, heading off unforeseen activities and disruptions.
Set the budgets
The budget involves a final projection of how much will need to be invested for the project to be executed and completed. This is not the time to base yourself on assumptions, as the values must be consistent with the reality of each stage of the planning.
The goal is to avoid surprises and to avoid the budget going over the expected amount. At this stage, it is important to choose the proposals with the best cost-benefit ratio, which will increase the chances of success.
Keep proper control
Cost control involves monitoring, throughout the project, whether the budgeted amounts are being met. The purpose is to monitor all expenses incurred to ensure that the approved budget is being followed.
It is important to note that cost control is an ongoing process. In other words, it must be carried out throughout the entire project execution. Therefore, it is essential to maintain consistency during analyses and comparisons between planned and actual expenses.
Have a margin of error
In addition to controlling expenses through periodic reviews, it is important to always work with a margin of error. This care helps ensure that the project stays within the estimated costs and the financial availability of the business.
This margin also helps to understand whether the planning was truly successful. If the budget did not have a satisfactory level of accuracy, it will be necessary to think of appropriate strategies to improve the execution of future projects.