What is project cost management software?
Are you still trying to keep track of project costs with spreadsheets? Or “guestimating” what your next project is going to cost based on nothing more than gut feel and a feel quotes? If you are, you don’t have to.
Project cost management can reduce wasted hours, wasted resources, and improve collaboration and time management during important projects - if you are using the right tools, that is.
Project cost management estimates and reports the cost of your projects as related to the budget. With project cost management software, you and your team can make adjustments and create forecasts based on accurate and up-to-date data.
What Is Cost Management and What Are the Stakes?
Cost management is the process of planning, estimating, budgeting, monitoring and controlling costs to optimize resource allocation and achieve financial objectives. It involves a proactive approach to identifying and minimizing expenses while ensuring that you (and your customers) get value for money. Think of it as the financial flywheel of any business or project.
Uncontrolled costs can eat into your profits, reduce your competitiveness in the market, and even lead to insolvency. If you consistently exceed budgets, you can derail the entire project entirely. Effective cost management keeps projects on track and within budget. It can have a big impact on your team too - overspending inevitably leads to more stress and insecurity at work.
Cost management addresses these issues head-on through budget estimation and cost control. It forecasts future expenses based on historical data, industry trends, and project scope. A good estimate sets realistic expectations and helps identify potential pitfalls early on.
Once you have a budget, it's time to stick to it! Cost control involves tracking actual spending against the estimate and taking corrective actions when needed. This could involve negotiating with suppliers, optimizing resource allocation, or finding alternative solutions.
Good cost management tools also have financial reporting functionality that can be accessed by financial leaders and project managers. Financial reporting involves gathering and analyzing data on income, expenses, and overall financial health. Regular reports help you understand where your money is going, identify areas for improvement, and communicate financial performance to stakeholders.
Choosing the Right Project Cost Management Software Solution
Choosing the right project cost management software is crucial for ensuring the success and profitability of any project. Here’s how to evaluate the criteria before making your selection:
Budget management
The software must enable complete management and definition of the project budget. It should support the allocation of multiple costs, including personnel, outsourcing, acquisition (such as software licenses, equipment, transportation), and any other expenses relevant to the project. This allows you to stay within your budget and make any necessary adjustments.
Cost allocation
Effective resource allocation is essential for project success. The software should facilitate the allocation of resources, particularly staffing, to different tasks and projects based on availability, skills, and project requirements. For example, you could allocate senior staff to the more crucial beginning phase of the project, and then allocate juniors to oversee its completion once it’s set up.
You can also move staff between projects to optimize their time.
Time tracking
Accurate time tracking capabilities are necessary for monitoring resource utilization and project progress.
The software should allow team members to log their time spent on various tasks and activities, enabling managers to track actual versus planned hours to avoid scope creep.
Forecasted Profitability and KPIs
The software should provide tools for forecasting project profitability based on estimated costs, revenues and other financial indicators. Key performance indicators (KPIs) should be customizable, and the software should offer alerts to notify stakeholders of any deviation from expected objectives.
Differentiation Between Estimated and Actual Costs
Clear differentiation between estimated and actual costs is essential for tracking project performance accurately. The software should provide visibility into both estimated and actual expenses, allowing for quick comparisons and detailed analysis.
Dependencies Management
Capabilities for managing dependencies between tasks, projects, and programs are critical for ensuring smooth project execution.
The software should support program management functionality and enable users to encapsulate projects within larger programs or portfolios.
Robust Reporting and Filtering
The software should offer strong reporting and filtering capabilities to identify issues, trends, and opportunities. Users should be able to generate customizable reports and filter data based on various criteria, such as team, geographical area, project phase, or cost category.
Cost and Revenue Analysis
The software should provide insights into earnings, revenues, and overall project financial performance. This holistic view allows stakeholders to make informed decisions and optimize project outcomes.
Which is the best cost management software?
A software solution is only as good as the people who adopt and use it. Integrated software may be ideal for saving time, but its benefits can never be exploited if it is rejected by employees.
Here are a few best practices to keep in mind:
- Prioritize Data Accuracy and Integrity
Integration of time tracking functionalities within the software ensures real-time visibility into resource utilization, facilitating precise cost tracking and forecasting. Historical data on resource utilization and costs enables more accurate forecasting of future needs and potential bottlenecks.
Integrating time tracking with project management software provides immediate insights into how resources are being spent on various tasks and projects. This real-time visibility allows for course corrections and adjustments before issues escalate.
- Establish Project Governance and Company Steering Processes
By integrating project governance principles, organizations can ensure transparent decision-making and guarantee that everyone stays within budgets and constraints. Linking project costs to key performance indicators (KPIs) and incentive structures motivates teams to deliver within budget and optimize resource utilization.
This promotes a "cost-conscious" mindset across the organization.
- Keep Billing in Mind
Seamless integration with invoicing processes is the easiest way to translate project effort into revenue as soon as it's completed. Platforms like Stafiz make it easy to transform project time and materials directly into invoices, streamlining invoicing procedures and reducing the administrative burden.
- Analyze Broader Financial Performance and Profitability
Beyond project-specific costs, it's crucial to analyze broader financial performance and profitability metrics. Comprehensive project cost management software enables stakeholders to assess overall project health and identify areas for improvement.
- Leverage Historical Data for Better Estimations
Reflecting on the costs and performance of past projects provides valuable insights for accurately estimating future expenditure. Software solutions like Stafiz offer robust data analysis capabilities, enabling organizations to learn from past experience and refine cost estimates.
- Consider Data Migration and Integrations
When implementing new cost management software, it is essential to consider data migration requirements and potential integrations with existing systems.
Platforms like Stafiz prioritize seamless data migration and offer integrations with accounting, business intelligence (BI), and other software solutions for enhanced functionality.
- Evaluate Total Cost of Ownership (TCO)
Understanding the total cost of ownership is critical for assessing the long-term value proposition of project cost management software.
The initial cost of the software is just the starting point. Total cost of ownership factors in all expenses associated with acquiring, owning, and using the software throughout its lifespan. This includes ongoing costs like:
- Maintenance and support fees
- Integration costs
- Data migration costs
- Hardware upgrades
TCO allows you to compare different software options more accurately. It helps you see which option offers the best value for money in the long term, not just at the outset. For example, cheaper software with high maintenance costs could end up costing more than a more expensive option with lower ongoing costs.
Using comprehensive solutions like Stafiz, which includes improved billable utilization, project margins, capacity planning, productivity and cost savings over legacy software replacements, meets the criteria for project cost optimization - helping you close more projects and generate more revenue.
Comparing Different Project Cost Management Software Solutions
- Harvest
This time tracking and invoicing software integrates seamlessly with popular project management tools, making it ideal for freelancers and small teams to capture project hours and generate accurate invoices for cost tracking. Although Harvest has a simple, intuitive interface and robust invoicing functionality, it lacks advanced cost management features such as budgeting and forecasting, and has limited reporting capabilities.
- Toggle Track
Offering simple time tracking with automatic cost calculations based on set rates, Toggle Track is a user-friendly option for individual contractors and small businesses needing basic cost management functionalities. Toggle Track comes with easy-to-use time tracking, automatic cost calculations based on set rates, at an affordable rate, but it’s not ideal for complex projects and lacks budgeting and resource management features.
- Smartsheet
Primarily a collaborative spreadsheet tool, Smartsheet offers project management functionality with cost tracking capabilities. It is suitable for teams looking for a flexible solution to manage projects, tasks and associated costs within a familiar spreadsheet interface.
It is flexible enough to set up customized cost tracking needs, and integrates with time tracking tools. It is not designed for project cost tracking, and cannot be used for complex forecasting, and has very limited reporting capabilities. This tool is not ideal for large projects.
- Asana
This popular project management platform offers basic cost tracking through custom fields and integrations with time tracking tools.
It's well suited to teams already using Asana for project management who want basic cost visibility alongside their tasks. It's a very user-friendly platform that offers cost tracking through custom fields and integrations, but has very limited cost management functionality and very basic reporting and analysis.
It’s not ideal for detailed cost control needs.
- Zoho Projects
This comprehensive project management suite includes built-in cost tracking features, allowing teams to budget, track expenses, and analyze project profitability. It's a strong option for organizations seeking an all-in-one solution for project management and cost control.
Zoho comes with built-in cost tracking, budgeting, and profitability analysis, and is generally good value for money.
However, it can be complex for small teams. The user interface seems rather cluttered, and customization options are very limited compared to dedicated cost management tools.
- Stafiz
Tailored specifically for agencies and service-based businesses, Stafiz goes beyond time tracking to offer features like project budgeting, resource allocation, and profitability analysis. It caters to teams needing in-depth cost management capabilities specific to their industry.
It caters for teams requiring in-depth, industry-specific cost management capabilities. Stafiz has a number of industry-specific features for agencies and service companies, but its advanced cost management tools such as budgeting, resource allocation and profitability analysis are easy to use.
Project Cost Management Tools Comparison Table
| Tool | Use cases | Features | Cost (per user/month) |
|---|---|---|---|
| Harvest | Freelancers, small teams | Time tracking, billing, basic reporting | Free for 1 user, paid plans available |
| Toggle Track | Individuals, small businesses | Simple time tracking, automatic cost calculations, limited reporting | Free (basic features), paid plans from €9 |
| Smartsheet | Flexible teams, customized cost requirements | Spreadsheet-based cost tracking, project management features, limited reporting | Free (limited functionality), paid plans available |
| Asana | Existing Asana users, basic cost tracking | Project management, custom fields for cost tracking, time tracking integrations | Free (limited functionality), paid plans available |
| Zoho Projects | Teams needing complete project and cost management | Integrated cost tracking, budgeting, forecasting, reporting, resource management | Free (limited functionality), paid plans available |
| Stafiz | Agencies and service companies | Advanced cost management, resource allocation, profitability analysis, project management | Free trial, paid plans available |
Comprehensive project cost management software goes beyond simple cost tracking. It integrates with financial systems, enabling transparent aggregation and analysis of various financial indicators such as revenues, expenses and profitability.
Advanced reporting and visualization tools help present insights in a clear, digestible way for stakeholders, enabling them to easily identify trends, track progress and make informed decisions.
The software can also facilitate scenario planning and forecasting, allowing stakeholders to simulate different financial scenarios and assess potential outcomes before making critical decisions.
When it comes to project cost management, don't just look at a single project or indicator. Look for a holistic solution that gives you the complete picture.
