By Mike Kenefsky
A project that routinely forecasts their Estimate to Complete (ETC) hours is much more likely to meet or beat budget targets.
Even more impactful — producing as much as 25% in savings — are projects that regularly perform an ETC using synchronized and transparent methods in their forecasts.
In order to see this kind of success, a project must have a tool with the ability to:
How in the world can this amount to 25% in savings? Simple. Like a balloon slowly going flat, budget leakage happens over time. The ability to manage the budget in a structured and shared environment gives a project the Visibility, Accountability and Timeliness needed to succeed in real time. Let me explain!
Responsible team members must always be aware of what was planned (Budget), what has been spent (Actuals) and actively forecast effort to go. More importantly, a regular review of the Actuals against Budget with a forecast of ETC hours requires serious critical thinking – confidential rates do not need to be included if that’s what you’re worried about.
Routinely answering the “How much effort is left to go?” ensures supervisors are aware of the commitment your management has to meeting budget. When variances are recognized, there is one change (which is NOW) to identify either a budgetary change, a change impact or a mitigation plan.
Project managers often find themselves lacking the right system to connect historical data with routine ETCs. Left to their own devices, the PMs seek out ad hoc methods, manual entry and rounds of supervisor phone tag to produce marginally adequate assessments of remaining budget. Informal methods force PM’s to interpolate/manipulate figures instead of understanding and addressing the underlying issues. Over time, opportunities to reduce cost are not only lost to leakage but mistakenly added to future estimates.
The original budget values in many cases are not assembled by the person managing the work. This means that busts in the budget are assumed to be the responsibility of the PM to resolve while work is underway and ongoing. However, having a way to capture these busts and share them with the estimator for future estimates limits these potential surprises.
Without an integrated software solution, managers are forced to focus more time on getting their spreadsheets updated and less time on fixing/mitigating issues. The steps discussed above require continuous updates to multiple systems for a report to render. Accounting systems or timesheet applications track hours. The planned hours are captured in a spreadsheet or estimating tool. Forecasted hours are managed in a spreadsheet or accounting system.
The typical scenario involves a PM reentering hours into a spreadsheet from the original estimate while compiling weekly hours from accounting. He/she needs to work with the supervisor to get the hours to go. By the time this data is collected, it’s often too late to do anything about it.
With the correct tool you can be notified of potential busts before time is approved for the week – changing behavior in real time and finding reductions you were not even aware existed.