The Importance of Tracking a Project’s Expenses
Maybe as most managers and administrators, you do not wake up in the morning saying that you are excited because you are going to start tracking a project´s expenses.
And that’s okay! I also don’t wake up excited like that and feel the same way as you do.
In fact, what is more common is to postpone this tracking of expenses and when it comes time to present the reports to the company or even when declaring tax you find yourself running around trying to gather all the hundreds of documents.
Now think with me, how much time (and stress) could you have saved if you knew the importance and how to properly track a project’s expenses?
I’m sure a lot of time… A lot!
Stay calm. In this article, you will learn in a simple and didactic way the importance of having a cost control during the execution of a project.
Continue reading this article to learn more about:
- Why is tracking my project expenses so important?
- What are the risks of not tracking project expenses?
- What steps are involved in creating and managing a project budget?
- How to make a successful cost control?
- Worksheet to keep track of project expenses and make your life easier.
Why is tracking my project expenses so important?
In a nutshell, I can say that the success of managing your project is directly linked to cost control. And this is something that all project managers should be familiar with.
I confess that keeping tasks organized while keeping you aware of cost control is not an easy skill to develop.
Although the organization of time and resources are vital to the success of the project, the cost performance is what defines the positive result of the plan.
And here are 6 other reasons why you should keep track of your project expenses:
- Financial awareness: the more you keep track of your costs during project execution, the more you are free to make changes and keep your plan on schedule and within the budget set during planning.
- Avoid conflicts: by tracking expenses, you can avoid conflicts that may exist between bills and receipts, especially when those costs need to be reimbursed to team members.
- Investments: if you have a report and also a database with all the information about the project’s expenses, it is much easier when presenting evidence of the project’s viability to any investor.
- Tax deductions for commercial expenses: the person in charge of the company’s accounting can request a complete report of the final costs of the project. This is extremely important as many of these costs can be deducted from your income tax, in other words, you can get cash back.
- You keep your employees happy: when you have a team involved in the project, they will probably need to pay for expenses that will have to be reimbursed by the company, such as travel, food and others, at some point. When this reimbursement is made immediately, you are able to engage and keep your team happier during the execution of the project.
- Support for future projects: when you follow up, you have greater control over what is being spent and also manage to organize all this information in a database that will support the budget and planning of future projects.
What are the risks of not tracking project expenses?
You already know that the success of your project is also directly linked to the efficiency and effectiveness of your cost control and monitoring.
On the other hand, failure means you do not have reports that can contribute to future projects, and may even compromise other important expenses of the company.
Depending on the complexity of the project and the budget level, the inefficiency in monitoring can lead the company to have financial problems and reach the point of running out of money to complete the project.
As you saw in the previous topic, when you are able to supervise accurately, you contribute not only to the current project, but also support the success of larger future projects with greater impact for the company.
What steps are involved in creating and managing a project budget?
Okay, I know that’s pretty obvious. But the truth is that many people ignore this step when it comes to budgeting the project.
This is where you meet with your team and make the most realistic estimate of what you will encounter during the project.
If you have done your homework, this is also the time to analyze the spreadsheets of other projects similar to the one you are planning in your database. At that moment try to identify strengths and areas for growth and improvement.
- Estimated budgets
After a pre-planning phase, you will have the project estimates at hand and the initial money will be available to you, from the beginning to the rest of the phases.
In this step you must specify in your schedule the resources of the project, including how the monthly cost for execution will be. After all, it is not enough to just have a general estimate, you will need to have openly documented the estimated monthly expenses with your team.
- Establish cost controls
After planning and defining where each part of the money will be used, it is time to assign permissions.
Where you will give different powers in decision making when it comes to releasing money. This is important in order not to overwhelm a single person with the release of money for several different parts of the project.
In summary you need to know that different types of expenses may require different positions and subscriptions for your payment.
- Cost tracking
In fact, the time has come to monitor the project’s expenses. It is normal for a given month to be below or above budget expectations.
Real-time documentation using expense control spreadsheets is essential for you to be able to control expenses.
Do not forget to keep your team motivated when they are able to meet the budget goals for that stage of the project, just as if there were delays, seek to analyze and find ways to accelerate the progress of the project.
- Measuring results
In future projects you will need to analyze the results of previous projects. For this reason, it is important that at the end of each reporting period you calculate your metrics.
Mainly assessing the budget you made in your pre-planning and how much money the project spent outside of it.
If you’ve followed all the steps we’ve shown so far, your numbers should probably be pretty close to what you’d expected to spend.
- Update the forecast
When you plan a project, you plan in the knowledge that unforeseen events can happen and you must be prepared with contingency plans.
This is normal, when you did your pre-planning you looked for realistic numbers as much as possible. But in the course of execution some things are completely beyond your control.
It is at this point that you should have documented in spreadsheets all the expense information for the previous months and steps. You will need this to update your cost forecast and also make changes to the project to keep costs within the initial budget.
- Continuous improvement
It is important that you know that there is no exact science to ensure that everything goes as planned.
You also don’t have to feel like a failure when a project’s expenses don’t go as planned.
If you followed all the steps and followed up and controlled your costs, be sure that you will be in a much safer place and conducive to improvement.
How to make a successful cost control?
The last thing you want is to lose your job or position because you were unable to meet the project budget.
If you want to prevent this from happening, there is a method that you must follow to correctly track your project expenses. It consists of 7 steps, they are:
- Implement systems or methods
- Provide shared online access to budget data
- Identify and list budget items
- Create and approve a budget
- Create templates
- Assign a responsible person to monitor expenses
- Track and control your expenses in real time
These are elements that you must follow to monitor your expenses.
You can also choose to follow templates in spreadsheets or risk ignoring this and having to pay dearly for your mistake.
Worksheet to keep track of project expenses and make your life easier
After everything you’ve read I know that the importance and steps to follow your project’s expenses during the execution process became clear.
You want your project to be a success and everything stays within the planned budget.
Obviously, to obtain these benefits, you need to invest in tools that will help you to track and control your expenses in a simple way.
These tools are spreadsheets that will not only help reduce the task of tracking costs, but will also ensure that each new expense is monitored to ensure that your project stays on track.
Guess what?! Adnia Solutions has the ideal spreadsheet for you to download right now!
Avoid unpleasant surprises during the project and more accurately predict the risk of the project budget.
Download the Project Expense Tracking Worksheet now and save time by improving your processes with our Excel spreadsheet.