The process of estimating, budgeting, and controlling costs throughout the project life cycle with the goal of keeping expenditures within the approved budget is known as project cost management. For a project to be considered successful, the following conditions must be met:
It meets the requirements and scope
its execution quality is high
it is completed on time
it is completed within budget
As a result, project cost management is one of the most important pillars of project management and is applicable regardless of the domain, such as manufacturing, retail, technology, or construction. It aids in the development of a financial baseline against which project managers can benchmark the current status of their project costs and, if necessary, realign the direction.
The significance of cost management is obvious. The budget will determine critical decision points such as: which designer to hire—a high-end one who will construct and deliver the project from start to finish, or someone who can assist with a few elements and work on a smaller budget? What number of stories should the house have? What material quality should be used?
Without a budget, not only is it difficult to answer these questions, but it is also impossible to determine whether you are on the right track once the project is underway. The scale of this problem is magnified in large organizations due to the concurrent running of multiple projects, changes in initial assumptions, and the addition of unexpected costs. This is where cost management can come in handy.
Project managers can save money by implementing effective cost-cutting measures.
Establish clear expectations with stakeholders.
Control scope creep as a result of customer transparency.
Track progress and take corrective action as soon as possible.
Maintain expected margins, boost ROI, and avoid project losses.
Create data to serve as a benchmark for future projects.
Track long-term cost trends.
