A cost management plan is a document that outlines the goals and objectives of the company regarding the costs. It’s an important plan to put together as it assists with identifying and measuring costs and keeping them under control. Now, you might be wondering how to create a cost management plan yourself. In this article, we are outlining some of the most important steps to take.
Step 1. Identify the Company’s Goals & Create a Plan
The first step in creating a cost management plan is to identify and document the company’s goals. Once this has been done, you’ll need to establish what metrics will be used for measuring the success or failure of the plan. Finally, it’s time to create an action plan for each metric that will be used as well as a timeline for when these actions will take place.
Step 2. Estimate Your Costs
Now it’s time to estimate your costs. In this step, you’ll need to determine which costs are controllable and which are not. Once you have identified them, you have to calculate how much each controllable and non-controllable cost is costing you on a monthly basis. Create a plan for reducing controllable costs and find ways to reduce non-controllable costs. Include both direct as well as indirect costs, eliminate unnecessary spending, and plan for unforeseen circumstances.
Step 3. Prepare a Budget Plan
Now that your cost estimation is complete, you can go into greater detail with your actual budget by preparing a plan. Budgets are typically released in a series of stages, depending on the progress of the project. To make budget management easier, you can use project management tools, such as milestones in the Gantt chart to divide your budget into phases.
Step 4. Track Your Performance
Managing your costs throughout the project lifetime is half of your cost management plan. Use your performance milestones to determine whether your project is on track, behind schedule, or over budget. You’ll need to compare your planned progress to your actual progress to make sure you’re on track. Many people utilise their preferred project management approach to measure this, whether they’re using the waterfall technique or a Gantt chart.
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