5 Ways to Avoid Project Budget Overruns

Avoiding budget overruns on a project is a key priority of top management. If a project goes wildly over the budget, as they often do, it will not be considered a success. Even if it’s delivered on time and meets expectations, it will still be considered a failed project if the financial resources went above budget.

Managers need to thoroughly manage their budgets. Cost overruns are a common occurrence when running projects. According to Wikipedia, a cost overrun, also known as a cost increase, underrated or budget overrun, involves unexpected costs incurred in excess of budgeted amounts due to an underestimation of the actual cost during budgeting.

In other words, a budget overrun on a project is the amount by which the actual cost of a project exceeds its budget. While this does not necessarily guarantee that the project will fail, it does make it more difficult to succeed.

Tweet this: Success doesn’t just happen, it is planned for

Project cost overruns should be distinguished from cost escalation, which is used to express an anticipated growth in a budgeted cost due to factors such as inflation. The actual budget overrun in projects can be described in different ways such as:

  • As a percentage of the total expenditure
  • As a total percentage including and above the original budget
  • As a percentage of the cost overruns to original budget

In this blog, I will share with you five ways to prevent cost overruns in your project budget.


  1. 360 Degrees Planning

This is an exhaustive approach to planning where you leave no stone unturned. Planning is crucial and is the biggest instrument against cost overruns and delays. Once the scope is properly defined and the process to get sign-offs from all the stakeholders, project roll out processes become easy.

Firmly establish the requirements of the project before getting started to avoid scope creep. Project overruns are usually a result of factors outside of the project team and thus need to be avoided before they creep in. Make sure the requirements are clearly mapped out properly. Remember, if it’s not written, then it’s considered not real. Even an e-mail validation can be deniable but a personal signature on paper is not.

“Success doesn’t just happen, it is planned for.” – Anonymous

  1. Assess Vendor’s Capacity

Before you hire a vendor, it’s imperative to thoroughly investigate capacity. Some companies are good on paper but when it comes to delivering on their promises, it’s all hussles throughout. Find out their team’s capabilities and check if that matches your project requirements. A wrong match can cost you big time and also brings in redundancy into your projects.

Investigate and see how good is the vendor at sticking to deadlines. Find out if the cost estimates are realistic. Overpromising vendors is one chief cause of cost overruns. So, you need to proceed with great caution. Always have a wide selection to choose from. Vigorously scrutinize before selecting the best one to work with.

“The cost of assessing risk is now often greater than the cost of failing.” – Joichi Ito

  1. Stick To The Project Scope

    Scope creep is one of the leading causes of project overruns.. Vendors like to put additions to the scope. While some of the changes might be necessary, too much changes can put the project in danger in terms of cost. It is essential to exercise strict budget control.

As unplanned work finds its way into your project, billable hours mount and the project budget can get out of control. Project managers must carefully manage scope by creating change orders for work that isn’t covered by the project’s initial requirements.

“We can do anything we want to if we stick to it long enough.” –  Helen Keller

  1. Prepare Your Project Team Fully

Prepare your team rigorously for best results. Keep lines of communication open for all stakeholders. As a project moves along, keep everyone informed on progress. Recognizing milestones can help keep the team to stay focused. Milestones also help you publicize your team’s successes.

By keeping the team informed of the budget status, they will be more likely to put a watchful eye on their work and ensure non wastefulness. Effective communication can help reduce the delays by avoiding working on wrong things and making the scheduling work better.

“By failing to prepare, you are preparing to fail.” –  Benjamin Franklin

  1. Schedule Well and  Use A Good PO System

Improper scheduling can cause wrong cost estimations and increase project noncoherence. You could use a simple Gantt chart or look for more advanced project scheduling tools to help you with scheduling.

You can’t improve what you don’t measure. It’s important to constantly track the progress of the various tasks and have various metrics to measure results. This will provide early signals of project delays and any indications of cost overruns.

“A lot affects the outcome. It boils down to scheduling and the commitment.” – David Ogden Stiers

To avoid budget overruns, you need to use a good PO System called is an automated purchase order system which helps you to avoid Budget overruns which cause a project to fail. It runs your budget saving you time and money.

You can approve or reject and track every purchase order request so you can spend within budget. It has customizable PDFs to suit all your reporting needs. It’s user-friendly and you can use it on mobile devices as well.

Try it here for free! Our 24-hour customer-success ninjas are waiting for you!

If you’d like more info about (automated purchase control system), please contact: [email protected]

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