How to manage a Project / Program underspend?

Posted by Amit Goel on 21st March 2021

As we are approaching end of the financial year, some of us might be experiencing underspending in our portfolio/programs/projects. Though underspend does not always reflect unhealthy financial status it also doesn’t call for celebration. Where it is imperative to have appropriate utilisation of funds in your projects, it is also important to spend it wisely at the right stage of the life cycle.

While some find financial management an art, others believe it is a discipline. It is difficult for some and is not everyone’s cup of tea.

Financial management is one of my favourite subjects and yes, I am talking about cost variance where budgets haven’t been spent as granted or estimated. We may experience this situation in a multi-year or large scale programs/projects.

Having cash in books is important but are we doing it right? Let’s dive deep into the subject. I follow a four-step approach in my projects -

Step 1: Validate the situation

Step 2: Assess all parameters in your program

Step 3: Recommendations or solutions as per findings from Step 2

Step 4: Implicate solutions and probable outcomes from Step 3

As an experienced project manager, you may recognize that the spend rate of a project cannot be linear. Actions planned for the last stage of your project will not be the same as planned for the initial stages. If you think otherwise, I am keen to learn from your experience.

?Validate – Is this really a problem

A large number of unknowns in the initial stages of the program or beginning of the financial year calls for higher contingency. Depending on where we are in the financial year, the situation decides our strategy.

Assessing all parameters at each stage is equally important. Spend will be different in each quarter in the financial year