What to Do If Your Project Budget Is Out of Control
When the project budget is out of control. The overall success of your project is threatened. Failure to control the budget may lead to lost investments, problems with stakeholder relationships and even termination of your services as a project management professional or project manager. However, you can minimize the damage from an out-of-control budget by following these six steps.
1. Determine How Far the Project Budget Has Gone Out of Control
You need to carefully analyze how much over budget your project has become. This is the only way to ascertain the monetary costs incurred by going over budget. Often, you will be able to immediately identify the dollar amount within your project management software. However, you may need to review the budget and schedule in their entirety to determine an exact figure, which will be required for reporting to upper-level management.
2. Review the Consequences of Any Immediate Actions, Such as Delays
Rather than taking immediate action when you discover your project is over budget, consider how every action and interaction may affect the future of your project. For example, terminating the employment of workers may seem like the logical solution, but it could result in additional costs, such as severance pay or even legal troubles.
3. Identify the Preceding Issues That Contributed to the Loss of Control
The budget did not get out of control in an hour or overnight. Multiple problems probably contributed to going over the budget. You need to identify these problems and work to prevent them in the future. If scope creep resulted in the budgeting issue, you will need to work on effectively managing and recognizing the warning signs of scope creep.
4. Retrain Team Members, If Warranted
Sometimes, a team member may make a decision that results in severe budget problems. If this occurs, the team member should be retrained on project management principles. But, if the problem continues, he or she may need to be removed from his or her position until competency has been re-established.
5. Consider Outsourcing Project Controls or Staff Augmentation to Reduce Long-Term Costs
Outsourcing some project controls may help to mitigate the costs of going over the budget in the long term. However, the short-term costs may be higher than anticipated, and you must ensure any outsourcing or staff augmentation services used fall within the specifications of your budget.
6. Implement Business and Risk Intelligence Solutions to Effectively Manage the Project
Business intelligence and risk intelligence tools should be developed in your organization. These tools will help you manage the budget more effectively in the future, and they may be able to alert you when a project may go over budget in activities and tasks that have not yet been completed.
Your skills as a project manager are not being used properly when your project budget gets out of control. How you react to major budgeting problems can determine the future of your career, so you need to follow these steps to restore your project to the constraints and deadlines specified within your project’s budget and plans.
Key Things to Remember
- Assess the state of your budget.
- Do not make any rash decisions without considering how they will impact the budget.
- Review the causes of the budget problems, such as scope creep, and work to prevent them from recurring.
- Retrain members of the project team if the issue resulted from failure to use project management tools properly.
- Excessive costs may require outsourcing of project controls to eliminate overhead in your organization.
- Develop business intelligence and risk intelligence to prevent the issue from recurring.