Your project report looks good. The work is progressing, the costs are within expectations, and there is a reasonable margin left. Then someone sends through a few old expense claims and another team transfers hours that were booked to the wrong project.
Suddenly, the figures you presented last month look rather different.
How much confidence would you have in your next report?
Problem: Late Claims Hide the Real Project Cost
Costs arrive after decisions have been made
It is easy to put off a timesheet or expense claim when there is more urgent project work to finish. A few hours here and a receipt there might not seem important.
But the project manager may be using those incomplete figures to forecast the final cost, allocate the remaining budget or report the expected profit. On an internal project, they might even recommend releasing funds that appear to be spare.
By the time the missing costs arrive, those decisions may already have been made.
Here, I am talking mainly about staff expense claims, timesheets and internal cost allocations. The process for claiming payment from clients is covered in Claims, Variations and Payment Schedules: Get the Timing Right.
A profitable project can suddenly show a loss
Suppose a completed fixed price project has revenue of $100,000 and recorded costs of $90,000. It appears to have made a $10,000 profit.
Then $7,000 of labour is transferred from another project, where it was incorrectly booked, and $4,000 of previously unrecorded travel expenses arrives. Assume these costs were not already included through an accrual or other allowance.
The project now has costs of $101,000 and a $1,000 loss.
The late entries revealed the loss. The work and travel had already happened, but the earlier reports did not show their full cost. Earlier information would have given the project manager more opportunity to investigate and respond.
Booking costs to the wrong project also distorts the figures for the project that receives them. Both project managers can end up making decisions using misleading information.
Solution: Make Cost Submission Part of the Work
Set a clear routine and allow time for approvals
I believe timesheets and expense claims should be treated as part of completing the work. They should not sit in a pile until someone has a quiet afternoon.
Ask people to record their time while they can still remember what they worked on. Set a regular submission deadline consistent with company requirements, and encourage expenses to be submitted promptly with their receipts.
Explain the month end timetable. The deadline should allow time for checking, correcting codes, approval and processing before the accounting cut-off. Sending a claim at the last minute does not mean it will appear in the report.
Include these instructions in your project management plan, with the submission location and the person to contact for help. Arrange a backup approver when the usual approver is away.
Make the correct cost codes easy to find
A claim submitted quickly can still be wrong.
Give everyone the project code and any task codes they need before they start work. Keep the current list somewhere easy to find, and update people when codes change or close. I cover this in Timesheet Cost Codes.
Check allocations regularly. If someone worked on your project all week but no hours appear, ask why. They may have missed their timesheet, selected the wrong code, or be waiting for approval.
Correct errors promptly through the approved process. Do not leave costs on another project because moving them will make your figures look worse, doing that will just come back to bite you later, when the other PM or finance spots it and transfers it to your project anyway.
Keep the process simple enough to follow
If submitting a small expense takes longer than the task that caused it, the process needs attention.
Provide clear instructions, working system access and a straightforward way to attach receipts. Avoid asking people to enter the same information into several systems where one entry can serve the purpose.
Explain why timeliness matters. People are more likely to take the task seriously when they understand that missing entries can hide an overspend and affect project decisions.
Check for missing costs before reporting
Before finalising the monthly report, check outstanding timesheets, unsubmitted expenses, pending approvals and cost transfers. Ask team members about costs that have been incurred but have not yet reached the system.
Where necessary, give finance a supported estimate so costs can be accrued under your organisation’s accounting policies. Identify what the estimate covers and reconcile it when the actual entry arrives, so the cost is not counted twice.
A purchase order for future work is a commitment; it does not mean the cost has already been incurred. Keep those distinctions clear when reviewing the forecast.
The Association for Project Management’s guidance on cost planning and control explains the importance of collecting actual costs for comparison with the budget. That comparison is much more useful when the information is current.
Lesson: Get Costs In Before You Rely on the Figures
Project managers need timely, correctly allocated costs to make sound decisions. Make sure your team knows when to submit hours and expenses, which codes to use, and how to get help.
Check what is missing before reporting a healthy margin or spare budget. A good result should stand up when the remaining claims arrive.
And if you are a team member on a project, remember that getting your timesheets, cost claims or invoice approvals in late can significantly affect the project and the project manager. The effect can be changing a profit to a loss, a budget release into a big mistake, and in some cases can even lead to company financial difficulties resulting in staff layoffs.
