Note: This report is the second in a three-part series. You can read the first part here.
Here, we examine some of the best project management (PM) software tools managers can use to manage budgets and avoid cost overruns.
In Software Advice’s recent analysis of how PM tools can help manage risk at each stage of a project’s life cycle, we surveyed project and team leads—and found that just 8 percent of them finish projects within the initial budget:
- One-third of respondents say that 1 to 10% of their projects run over budget
- 38% say that 11 to 20% of projects suffer budget overruns
- 18% say 20 to 50% of their projects end up costing more than was allotted
Percentage of Projects That Run Over Budget
There are several factors that can cause a project to exceed its initial estimated cost:
⇒ Poor planning: This includes inappropriately breaking the work down, estimating labor hours and/or employee rates and inaccurately staffing tasks and phases.
⇒ Poor execution: Failing to manage scope creep, or failing to accurately monitor, report on and analyze progress via project status updates.
⇒ Poor closeout: Both projects and milestones must be properly closed out, so that resources can be reassigned and work can be invoiced. This involves monitoring tasks, time and expenses, as well as tracking the progression and timeliness of deliverables.
Using PM software can help managers more accurately quote projects, monitor the progression of deliverables and key milestones and maintain the accuracy of a project’s budget throughout the life of the project. To help in your efforts to plan for and track project expenses, we’ve put together a list of PM products with budget and expense management capabilities.
As determined by survey data as well as reviews submitted by actual users of these products to Software Advice’s website, the following tools are some of the most popular and highest-rated. The software capabilities listed here are not meant to be all-encompassing, but rather, represent a sample of features that can be useful for managers when setting and monitoring a project’s budget:
Mavenlink’s Budget Management Capabilities
Budget and expense management: The “margin analysis” tool can be used to measure actual versus projected profit margins as well as billable versus cost amounts. With a “work-in-progress” view, managers can track time that has accumulated on projects, but has not been billed for. Additionally, managers can set bill rates and cost rates for employees, making status reporting on budgets more accurate.
Project and job costing: This allows managers to calculate how much a project should cost to remain profitable by factoring in personnel expenses, billing rates and scheduled hours. Once a project’s budget is set, change orders can be used to track any changes that occur over the duration.
Time and expense tracking and approval: Managers can track and approve billable and nonbillable time and expenses for tasks and projects. And with integrations to accounting platforms, such as QuickBooks, managers can sync projects for more accurate job costing, invoicing and payroll.
Dashboards and reporting: With “project status report,” “work-in-progress” and “expense report” functionality, managers can accurately view time and expenses incurred to date on a project, as well as how projected and actual margins compare.
Clarizen’s Budget Management Capabilities
Budget and expense management: Users can track expenses by department, employee, project or task, and can set hourly rates for projects, users or roles. Additionally, managers can see how budget estimates and projections tie to actual expenditures—making it easier to stay on track, or course-correct if need be.
Project and job costing: With Clarizen’s project portfolio management functionality, all requests for new projects and changes are centralized, allowing managers to compare available resources, team workloads and budgets. This allows more accurate planning for future jobs, based on available funds and team bandwidth.
Time and expense tracking and approval: View timesheets and track expenses and approvals within the system. Managers can even set billing rates for personnel and tasks or project phases; then, when team members log time in the system Clarizen will automatically calculate the correct amount and cost of billable hours. This updates the budget in real time.
Dashboards and reporting: Both standard and customizable reports are available. Managers can view status reports on budgets and expenses, as well as on team workloads, progress on deliverables and impending deadlines. Additionally, users can share dashboards and reports with stakeholders by sending a live link.
Using PM software can be hugely advantageous for managers in maintaining both the accuracy of original quotes and ultimate profitability of the project. These products can assist with:
- Cost estimating
- Tracking time and expenses incurred throughout the life of the project
- Monitoring phase completion and invoicing of milestones as the project progresses
PM tools can help managers maintain transparency, improve accuracy in expense management and reduce cost overruns. In just a short phone call, our project management Software Advisors can help you evaluate your needs and chose a PM software solution that increases your chances of project success.
To collect the data used for the chart: “Amount of Projects That Run Over Budget,” we conducted an online survey which ran over the course of several days and included 18 questions. We gathered 114 responses from project managers, engineers and team leads within the United States. We screened our sample to only include respondents from industries which most frequently use PM software (this includes: business services/information technology, construction/engineering and manufacturing)—this information is based on our previous BuyerView data. Software Advice performed and funded this research independently.
To arrive at the information used in the product comparisons, we surveyed software users about which systems they’re currently using (and screened the sample to only include real users of PM software). We then took into account the number of reviews left by actual users of these products on Software Advice’s website and looked at only those with a high number of product reviews (20 or more reviews and four or more stars). The features discussed in these sections may not be available with every product package and/or pricing tier.
Results are representative of our survey sample, not necessarily the population as a whole. Sources attributed and products referenced in this article may or may not represent client vendors of Software Advice, but vendor status is never used as a basis for selection. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.
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