Post By Charlie Heywood on February 22, 2016

How to avoid damaging cost overruns in your engineering projects


Cost overrun remains a big problem for engineering services companies. Projects that go over budget may not attract the headlines in the same way that a major construction initiative does for blowing its target, but they can have a similar effect on your bottom line.

Both finance directors and project managers have an interest in keeping cost overruns to a minimum. The best results can be achieved when they work together to make this happen. An integrated business management system such as SAP Business One, with a Job Costing software add-on, is able to support this process by keeping all job and project data in a single place.

More on that later – first, let’s look at how you can ensure project costs never spiral out of control in your engineering services company. (If you know it’s the software that’s the issue though, you can find out more about the job costing software functionality here.)


Jason Westland is an experienced project management expert and the author of a book on the subject. Back in 2011, he shared four strategies with for managing project budgets and preventing cost overruns. Although aimed at helping project managers, his ideas can equally be applied to finance managers responsible for accurate job costing:

Continually forecast the budget

Westland noted that frequent budget oversight prevents the budget from getting out of hand. You have a much greater chance of keeping the project on track if you review the budget frequently, rather than forecasting once and forgetting about it.

Regularly forecast resource usage

He added that you need to apply the same level of careful monitoring to resource usage, since the people working on the project contribute to its cost. Doing this should ensure that you’re utilising the resources you have to the fullest. Regularly revisiting the resource forecast will keep the project budget on track.

Keep the team informed

Keep the project team informed of your project budget forecast, Westland advised. An informed team should be empowered to take ownership of the project. They will then be more likely to take responsibility for the time they charge and less likely to charge extra ‘grey area’ hours to your project (hours that they know they worked but aren’t sure what they were working on.)

Manage scope meticulously

Scope creep is one of the leading causes of project overruns. As unplanned work finds its way into your project, billable hours mount and the project budget can get out of control. It’s important to carefully manage scope by creating change orders for work that isn’t covered by the project’s initial requirements.


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