You know what they say, time is money, and this is definitely the case when it comes to project management. When you take any of the available project management training courses, you will focus a lot on the financial side of things. A key part of project management training is learning how to implement accurate deadlines, and also, how to stick to them. To understand this in further detail, read on to discover more about the relationship between time and cost in regards to project management.
You can be pretty much certain that you are going to go over cost estimates if your project is running behind. Every day that a project is in existence, it costs money. So, let’s take a look at the impact of delays on different types of costs, beginning with indirect costs, which are also known as overheads. The fixed costs of general facilities, services, accommodation, administration, and management are going to take place every day, irrespective of whether the work is done or not. They only stop once the project is completed. Therefore, it is easy to see how you will go over estimates if you go over t he planned deadline. Every day extra is a day that you are going to be spending more on overheads.
What about direct costs? Direct costs, otherwise known as variable expenditure, include the likes of materials and labor. These expenses are time-related in a number of different ways. The most obvious factor is cost inflation. So, if the project finishes later than expected, you could end up with greater costs on your hand because of an increase in wages or a rise in the price of materials. Another reason for an increase in expenditure is because of inefficient working. Waiting time or lost time can happen for a number of reasons, from poor planning to material shortages. The budgeted man-hours are likely to be exceeded if the project goes over the duration you have planned.
Not only do you have to consider fixed and variable costs, but it is also important to look at the impact of project delays on the cost of financing. Are you relying on loan financing? Or, perhaps you are using a bank overdraft? When it comes to financing, interest must be paid. If your project is behind schedule, the period of financing is going to be extended, and this means that, in correspondence, the interest payable will increase. Even if the contractor uses his or her own funds, there is still a notional cost of financing.
All things considered, it is quite clear to see the importance of implementing accurate deadlines and ensuring you deliver on them. Often, a lot of project managers set their team up for value, as they set deadlines that are too optimistic in order to try and keep those at the top happy. However, this is a recipe for disaster. Instead, make sure your deadlines are as accurate as possible and communicate regularly with your team to pick up on any problems before they get worse.