Your organization’s projects are critical to its future. Sound cost management enables you to make optimal use of your resources (time, personnel, equipment, and materials), make data-driven decisions about projects and their risks, measure financial performance, and provide key metrics to senior management.
This definitive guide to project cost management includes templates for key activities like cost estimating and creating a cost management plan. You’ll learn important terms, best practices, and subtle distinctions (such as the difference between cost management and strategic cost management), as well as how cost management works in specialized cases, like construction and IT projects.
Planning is the bedrock on which any successful project is built. Improvisation may come to play when you’re executing that project plan, but even that needs a framework or you’ll be constantly chasing after your own tail.
It’s not rocket science, as they say, to create a project management plan, though you can bet the bank that rocket scientists are planning ahead before lighting the fuse on their rockets. Even NASA uses project planning software. In fact they use ours, so here’s a simple process to gather all the data you need and how to organize it to start off your project right.
Before we jump in, let’s make sure we understand what a project management plan is and why you need to have one. A project plan is made up of three things:
Activities: the task status, priority, time, human and financial resources assignments, recurrency, notifications, etc.
Tasks: the smaller jobs that make up the larger project.
Resources: what you need—people, equipment, site, etc.—to accomplish the tasks in your project.
These are what you need to complete the project as outlined in your business case. The project management plan is then broken up into these parts:
Project phases: this is the life cycle, from initiation, planning and execution to monitoring, control and, finally, closure. So, you’re breaking the schedule of a project into more digestible parts. Think of them as mini-projects that can be denoted by milestones, which are diamond-shaped symbols on your schedule.
Schedule of activities: this is basically a to-do list of what needs to be done to complete the project. It is here where you’ll collect everything big and small that is related to moving the project from start to finish. Then prioritize the list to get an understanding of the importance of each item.
Tasks: these are small jobs make up the larger project. They should be small, incremental steps towards the final product. You can pull them from the schedule of activities you created in the prior step.
Duration: calculating how long you think each task and phase will take. These are estimates, but they need to be figured out against the larger timeframe you have for completing the project. Be realistic, remember that the project has a deadline.
Dependencies: noting any tasks that are dependent on other tasks being completed before they can begin. You can link these dependencies and set up notifications so your team knows when they’re complete, so as not to block team members and send the project off-track.
Resources: what you need to do the project. This can be anything from the people on your project team to the equipment and project management software they’ll need to complete their tasks to the place where the work will be done to vendors and outside contractors, etc.
Timeframes: working back from your deadline to determine how much time you have for each phase of the project. A timeline gives you a visual of the schedule and the tasks, which allows you to better know how to space out your workload.
Budget: what are the costs involved in allocating all the resources you’ll need to complete the project? This number is going to need approval, and is going to be within a range, so you must be realistic when making estimates.
Assemble a team: you need the people who will execute your plan, based on the skills required and experience and whether they’re going to work remotely, etc. You want to include time for training, if necessary, and team-building exercises if they’ve never worked together.
Monitor progress: have a plan in place to track the progress of your project plan. Online project management tools offer functions that calculate the actual versus planned progress in real-time, which gives you the control to change issues before they become problems. Project planning software gives you the tools you’ll need to monitor the project. Because it’s online, you’ll know immediately when something begins to fall off-track. The sooner you have that information, the better.
First Steps to Creating a Project Management Plan
As you begin to build your project plan you need to define a number of things to give you a clear picture of what it is you’re planning to do.
Determine the project scope: It sets up the boundaries of the project and the responsibilities of each team member. It does this by determining and documenting specific project goals, deliverables, features, functions, tasks, deadlines and costs.
Identify tasks milestones: tasks are small jobs that make up the project, while a group of related tasks in the project that signal the end of a project phase are called milestones. These milestones, indicated as diamond-shaped icons on your schedule, help you further break down the larger project into more manageable pieces.
Quantify your effort: figure out how much of something you’ll need. You need to estimate which resources and how much of them are going to be required when you’re making a plan to come up with a feasible budget.
Allocate the resources: get the project planning tools, teams assembled, vendors, etc. This is where you begin to take the disparate parts of the project and organize them.
Make a schedule: take the above data and put it on a timeline. Here is where you can lay out all the tasks and milestones that mark the different phases of the project.
List dependencies: link tasks that rely on one another. Task dependencies are then identified and can be automated to alert you during the project when they are completed or if they’re not progressing as planned.
Document everything: always keep a detailed paper trail. You want to have all the paperwork for each step of the project plan. That includes contracts and timesheets for your team. At the end of the project these documents will be crucial to closing the project correctly.
Remember, you have already created a business case, which offers a general view of the project. The project management plan is where you take that view and drill down in greater detail. This project plan is not something you write and are done with. You will be revisiting it throughout the life cycle of the project, referring and revising it as you execute that project.
How Project Tools Can Help
Planning tools are going to make creating your project plan that much easier and efficient. If you’re not already using an online project planning tool, get one. There are many tools that required little to no training, and don’t cost an arm and a leg.
Online PM tools make sharing your project management plan simple. When you start assigning tasks and share the plan with team members, you want to have a tool that can be accessible to the techie and the luddite alike. Because everyone on the team will be using this tool to update their statuses, and that means you’ll get real-time data on the project that allows you to manage it more productively.