The Importance of Project Cost Control

Cost control is necessary to keep a record of monetary expenditure for purposes such as:

Minimizing cost where possible
Revealing areas of cost overspending

Why is cost control important?

Does your team have a hard time staying within scope or budget? This is where cost control comes into play. Even if your team does stay within budget, cost control can help you reduce your budget further, which will lead to an increase in income.

In a competitive marketplace, low-cost producers are the ones that can earn the highest profits. Reducing costs is therefore a key objective for most businesses since it increases both efficiency and profitability.

Key Features

Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process.
Cost control is an important factor in maintaining and growing profitability.
Outsourcing is a common method to control costs because many businesses find it cheaper to pay a third party to perform a task than to take on the work within the company.

The Value and Benefits of Project Controls:

1. Plan your budget

The first step is to plan your budget so you can get granular with your cost estimations and effectively allocate resources. Making a detailed project plan will result in lower cost variances—or fewer differences between your initial budget and actual spending.

2. Monitor all expenses

Monitor project expenditures as they occur. It’s easier to take corrective action if you notice cost variances in real-time. If you don’t notice you’ve gone over budget until the project is complete, then you’ve already spent the money.

3. Manage your time

Time management is an important cost control method because when the total time of a project increases, the total cost of the project also increases. Staying within your estimated project schedule is one of the best ways to stay within your project budget.

4. Track earned value

Keeping track of your earned value can help you predict the financial outcome of a project. This cost control method takes some cost accounting knowledge, but it can help you understand when variable costs will arise and ultimately prevent variances from occurring in future projects.

Conclusion

Cost control can occur at the project level or company-wide, and it involves identifying and reducing expenses to increase company profits.

As a project manager, you’ll use cost control to monitor your resource management plan and take action when you notice overspending.

It provides insight into the company’s overall spending by showing what areas cost the most within the business and what expenses occur within those areas. Cost control may first occur at the project level to reduce individual project costs in the hopes that the company can increase overall profits.