Some projects may be relatively straightforward to cost, but most are not. Even simple figures like the cost per hour of labour can be difficult to calculate and often approximations are used. At a fundamental level, the process of costing is relatively simple:
- Draw up a list of all your likely expenditure, and then
- Put a numerical value against each item.
The total of these equations, therefore, represents the tangible cost of your project.
You may also however need to consider ‘intangible’ items.
What Are Tangible Costs In A Project?
This refers to any large asset of the project which is purchased outright. This usually includes plant, hardware, software in addition to sometimes even buildings although these can be accounted for in a number of different ways.
Some assets are not purchased completely but are rather leased in order to spread the cost over the life of the project. These assets should be accounted for separately from capital expenditure as the project or organisation does not own these assets.
All costs for staff members must be accounted for, which includes (but is not limited to):
- Salary and pension costs: insurance costs, recruitment costs – in other words anything that can be tied directly to employing, training in addition to retaining staff.
- Professional services: all large-scale projects need the input of one or more professional groups such as lawyers or accountants. These are usually accounted for separately as a close watch needs to be kept on expenditure in this area.
Without keeping a watchful eye on these, the costs of a consultant engineer, accountant or lawyer can rapidly dwarf other costs.
Supplies And Consumables
Regular expenditure on supplies is usually best covered by a single item in your budget under which these numbers are accrued. They are related to overhead costs that are covered below.