Simply put, sticking to a project budget ensures your spending stays in line with the money you are generating and the overhead to execute the project. If you look at statistics for all types of projects, you will see anywhere between 40-80% of all projects exceed the initial budget. There are many reasons for budget overruns. Here are a few of the most common.
Lack of Communication/Collaboration
Kellan Lutz, the American actor once said, “A lack of communication leaves fear and doubt”. Although he was discussing relationships, it certainly resonates when it comes to keeping projects on budget while meeting timelines. Oftentimes, there are many resources involved in the execution of a project. If communication and collaboration are lacking, there will be a hesitancy introduced into the process that not only slows it down but introduces mistakes from ambiguous or lack of communication. If teams are not working together, one part of the team can execute at a high level, not realizing that they impacted another negatively. To keep budgets in check, a clear picture of who and how the project details are communicated and collaborated on is a must.
They say the only things that are guaranteed in life are death and taxes, but many believe change is the third element that is overlooked. Project changes can be customer-driven or they can be driven by the many departments’ influences on the projects you are executing. But one thing is for sure - there will always be some changes. If you are not well equipped to evaluate, estimate, and execute those changes, you are introducing cost into your project. As a project leader, you should be focused on having a reliably repeatable change process that involves all stakeholders efficiently.
Inadequate Initial Evaluation
There is a trap during project evaluation to oversimplify the evaluation of a new project because it’s similar to a project that you have done before. Or maybe you are evaluating projects so frequently that you can spend the time to adequately evaluate the complexities of the project. Oversimplification will underestimate project resource times and costs. This makes it easy to see why this is a big factor in budget overruns. To avoid this problem in project evaluation, you must detail out each factor and be thorough about your estimations.
These are only a few factors that contribute to projects commonly exceeding the predicted budgets. In order to become an organization that effectively masters budget allocations, you must look at these three factors and develop a comprehensive plan to combat their effects. CADimensions works with customers every day to refine and develop their processes for communication, managing change, and evaluation of projects to provide guidance. Let CADimensions help guide you to reducing the factors that contribute to exceeding project budgets.
Start Completing Projects Within Budget