It’s a situation familiar to every small business owner: the nightmare project that’s spiralled out of control and sucked everything into its orbit. In many cases, it started out sounding like a simple, easy-to-deliver project and ended with you throwing everything at it – including the kitchen sink – in a desperate attempt to get it off the ground.
When it’s finally over there’s a sense of elation. There’s also the sinking knowledge that the budget management was a disaster. Perhaps it was a contract for a client and you know you didn’t break even, let alone make any profit. Maybe it was in-house activity, such as exhibiting at a conference, and you know you can never hope to achieve return on investment.
But, while everyone remembers the nightmare projects, it’s often true to say that many projects end up being less profitable than originally planned. Little additions here, changes of direction there, all take their toll. So how can you keep a handle on a project and the budget? Here are a few tips to keep in mind:
Scope the project carefully – and communicate it clearly
It’s a truism because it’s true: It’s all in the preparation. Take time to scope each project carefully and establish the requirements. Make sure you document these requirements in detail and get them signed off by all the stakeholders whether they’re internal or external. Doing this achieves two things: It gives you certainty that you’re all on the same page, and helps you rein the project back in – or negotiate a change to the budget – if the scope starts to creep.
When it comes to putting the budget together, build in an element of contingency so you have some flexibility and can cope with a few surprises. It’s also worth considering whether the budget could be affected by things you can’t control. Perhaps you buy components in dollars but sell them in pounds, leaving you at the mercy of currency fluctuations. Or perhaps there’s a risk a supplier could let you down at the last minute meaning you have to find a more expensive alternative at short notice or risk missing the deadline. Is there a backup plan for situations like these? Does your contract cover you?
Keep checking in on the budget so you can take action before it’s too late
A budget should be a "live" document, one you check in on regularly throughout the duration of a project. It gives you the ability to see when the costs are starting to drift much earlier in the process. It also means you can take action to put it back on track much earlier too. Plus, a 10% budget overrun is easier to deal with than a 50% one. A big part of that is knowing what you have spent upfront on expenses, or committed to spend on invoiced purchases. The earlier you are able to get this insight, the sooner you can correct course.
Make a habit of it
Keeping a handle on your budget is a habit worth getting into. As the saying goes, "a stitch in time saves nine." It’s the only way to stop nasty surprises later down the line. If you’re thinking about the additional workload it will entail, it’s worth bearing in mind that tracking costs and budgets becomes much easier when you’ve automated some or all of your finance functions like expense and invoice management.
In essence, you spend less time processing data so you have more time to analyze it. It means it’s easier to make informed decisions that are best for your business. One SAP Concur user, a Director of Company Operations at a small financial services firm, recently reported: “We are now able to better understand the total return on investment of working with a client, which helps us to manage workflow and gives us the ability to be more selective on the projects we work on.” That’s powerful insight that can mean the difference between ticking over or flourishing.
To see what return on investment an automated expense or invoice process can deliver, we commissioned research with independent analyst AMI. Take a look at the research findings here.