Why Effective Cost Tracking Matters in Project Management

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Effective project cost tracking is a crucial element in project management, as it enables project managers to keep up-to-date with the financial situation of their projects. Overspending and delayed decisions on cost reduction are among the critical reasons for the failure of IT projects. 

Statistics show us: 

• according to Wellington's 2020 report, just 43% of companies consistently finish their projects within the allocated budget;
• simultaneously, the same report indicates that 27% of projects go over their budget;
• Axelos (2019) reported that unsuccessful IT projects resulted in a loss of revenue and productivity amounting to $50 billion to $150 billion in the United States.

So how do you prevent these losses and effectively track costs in IT projects? The process is complex and multilayered, but there is a particular backbone of basic steps that cannot be ignored.

Project Cost Management: Fundamentals

Here are some tips on how to keep your finger on the financial pulse of the project and prevent losses: 

1. Stay on a budget: By tracking project costs, project managers can ensure they stay within budget. They can monitor actual costs against budgeted costs and make necessary adjustments to keep the project on track financially.
2. Identify cost overruns: If a project is running over budget, project cost tracking will help you identify where the cost overruns are occurring. This information can be used to adjust and prevent further overspending.
3. Make informed decisions: When project managers have a clear picture of project costs, they can make informed decisions about resource allocation, scope changes, and other project management decisions. This helps ensure the project is completed on time, on budget, and to the desired quality standards.
4. Effective resource management: Project managers can allocate resources more efficiently using cost data. This includes giving resources to areas where they are most needed and adjusting staffing levels to optimize costs.
5. Improve project profitability: By tracking project costs, project managers can identify areas where costs can be reduced, or efficiencies can be improved. This can lead to increased profitability of the project and the organization.
6. Use ready-made solutions: add-ons such as Cost Tracker for Jira Cloud will help you quickly and efficiently track expenses and identify overspending in time.

How to use Cost Tracker for Jira Cloud to calculate project costs

Cost Tracker for Jira Cloud is a simple and functional app that will help you implement the above tips.

The add-on will synchronize with all Jira users upon product installation from the Atlassian Marketplace. 

How to use the app? Briefly and to the point.

1. Set hourly rates for your teammates. You can also add Billing Hourly Rate (if you sell your company's services to third-party customers, this functionality helps you quickly generate invoices and track the project's current cost with or without a markup).

2. Add expenses associated with the development of the project.

These can be recurring expenses and one-time expenses. The functionality of adding it is quite advanced. You can enter the following parameters: 

1. name of the expense;
2. amount;
3. related field - this expense will be associated with the selected field and value. It won’t affect the calculation (project, user, category, etc.);
4. related field value;
5. expense date;
6. briefly describe it. It's important for the further history of expenses and for understanding why it was made and under what circumstances;
7. related Jira issue link;
8. category - you can create your categories for better visualization and layout of the expenses;
9. expense owner;
10.  if these expenses are recurring, it is possible to set the frequency of occurs, and the add-on will automatically make them within the specified period;
11. you can also set the recurrence frequency or specific end date.

3. Prepare a Jira filter by tasks that will provide you with a sample for generating cost reports.

It can be a selection of tasks for a project for a month, all tasks included in developing a particular release version, individual sprints, etc. Save the filter and name it.

4. Go to the Cost Report tab and click the Generate report button.

Important - if you need to generate an invoice, you need to enable the revenue tracking settings, and the report will include the cost of billing hours that you set in the first step.

Also, if your company tracks worklogs in Tempo, you can use them in Cost Tracker for Jira Cloud reports (instructions - Get Tempo Worklogs).

Optimize Jira tasks management

When it comes to recurrent activities or tasks that appear in your workflow, the smartest way to save time and prevent yourself from performing useless actions is to automate the creation of tasks or all of the workflow. Jira BPM (Business Process Manager) is there to help you with the optimization of your regular work processes. After setting the process once, BPM will do the same task continuously. 

For example, product managers may have typical weekly assignments such as analyzing logs, creating KPI reports for clients, and check tasks. Here is what needs to be done: 

• list all recurrent weekly tasks and introduce them in BPM, 

• designate a single or multiple assignees for each task,

• determine the priority and sequence of each task.
• Add approvers if you need someone to check the task

BPM will automatically create tasks for the chosen assignees at a specific time.

In addition, Business Process Manager streamlines routine activities and reduces expenses due to the fact that everyone knows where documents and information is stored, the steps that need to be taken, and who is taking part in the procedure. To use BPM, list all activities that occur each week, determine the individual or individuals responsible for each task, and provide authority and direction for each task.

Takeaway

In summary, project cost tracking is essential for project managers to ensure that their projects are completed on time, within budget, and to desired quality standards. It helps project managers make informed decisions, effectively manage resources, and increase project profitability.

To implement this process, we suggest you use the Cost Tracker app. You will get at least a 30-day trial to implement the add-on in your workflows and get to know it well. We hope it will be helpful for you!