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Running over budget: 5 project management costs to be aware of in business courses

09/27/2018

Mistakes can occur in lots of different ways when you’re trying to manage a large project. Here’s how to guard against such problems with an MBA degree.

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Budgeting is a talent, and it takes particular foresight to prepare for potential cost overruns. In business, these unforeseen expenses or financial errors can end up costing a lot. Project management professionals need to be prepared to eradicate potential risks, or mitigate the damage if such overruns are unavoidable.

 

Projects run over budget for lots of different reasons. Personnel are at fault for some, while a failure in technology could also cause the problem. Don’t be concerned if it does occur. A 2017 KPMG business survey found that only 29% of organizations are likely to deliver projects on budget. It’s an unfortunate reality of business, but it can be catered for with proper planning. Here are five potential financial problems to look out for in project management.

 

Hired contractors may experience problems

Whether it’s the providers of raw materials or the transportation companies needed to distribute goods, most businesses rely on outside contractors for help. This relationship may offer the potential for increased savings, but maintaining oversight of their performance is much more difficult.

 

These vendors could experience business difficulties of their own, which means they can’t carry out important duties. This may force the original company to source a different contractor at short notice, and probably at a higher price.

 

Eradicating poor communication with an MBA in Project Management

Project management could involve hundreds of smaller subtasks, each of which have different deadlines and budgets. Graduates of business courses know that strong communication channels should be developed with company colleagues, whether it’s done through face-to-face meetings or electronic messaging.

Business man using calculator
Develop a positive communication channel with your colleagues

If there’s a problem with one part of the project, it may affect many others. Assess who needs to be informed about these potential challenges, so that changes can be made to the overall project plan. Failure to communicate problems could lead to the waste of resources on futile tasks.

 

Beware that weather could hurt project performance

There are lots of potential risks that can be avoided with thorough planning, but the weather isn’t one of them. The National Oceanic and Atmospheric Administration in the US estimated that weather-climate disasters in 2017 cost the American economy just over $300bn.

 

The transportation of raw materials or finished products may be affected by freak weather events, thus delaying projects and increasing expenditure. Bad weather may also prevent employees from getting to work. Project managers should budget for these potential freak occurrences in their plans.

 

Employee unavailability can delay project progress

Moving beyond the unavailability of employees during freak weather events, workers can also become ill or must attend to personal emergencies. These unforeseen events can end up leaving the business, and its project, short-staffed.

 

This may force the temporary hiring of substitute staff, or the slowing down of project operations until the employee returns. Both of these scenarios end up costing the business money, so MBA degree holders should try to budget for such eventualities.

 

Human error is an unfortunate reality of business

Mistakes happen, no matter how much planning has gone into a project. Workers could end up putting a decimal point in the wrong place, or sending products and services to the wrong people. Even the best employees aren’t perfect, and it’s important to budget for these potential errors. Proper management oversight can help to eradicate some of these issues. Ensure that review procedures are in place for important documents and processes to identify and remove possible errors.

Editor with red pen proofreading a document
Proof-reading can help to limit potentially expensive mistakes

Help businesses achieve success with an MBA in Project Management.

Find out more details about our part-time program at WU Executive Academy.

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