{"id":27823,"date":"2024-10-03T10:17:38","date_gmt":"2024-10-03T08:17:38","guid":{"rendered":"https:\/\/clockify.me\/blog\/?p=27823"},"modified":"2026-05-19T02:00:00","modified_gmt":"2026-05-19T00:00:00","slug":"cost-overrun","status":"publish","type":"post","link":"https:\/\/clockify.me\/blog\/business\/cost-overrun\/","title":{"rendered":"Cost Overrun: Causes, Warning Signs &#038; How To Prevent It"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Cost overruns are a common challenge in project management, impacting everything from project efficiency to client satisfaction.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, you can <strong>minimize the risk of cost (or budget) overrun<\/strong> \u2014 with the right strategies and tools.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here are the main causes of project cost overruns, tips for avoiding them, and expert insights.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"600\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Cost-Overrun-Causes-Warning-Signs-How-To-Prevent-It-cover-e1779200753972.webp\" alt=\"Cost Overrun - Causes, Warning Signs &amp; How To Prevent It - cover\" class=\"wp-image-38040\"\/><\/figure>\n<\/div>\n\n\n<div class=\"wp-block-group key-takeaways\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<ul class=\"wp-block-list\">\n<li>A cost overrun occurs when the actual costs of a project exceed the planned budget.<\/li>\n\n\n\n<li>Some of the main causes of cost overrun are inaccurate estimates, scope creep, poor risk management, and inflation.<\/li>\n\n\n\n<li>Managers can prevent a budget overrun by creating a comprehensive project plan, monitoring for warning signs, and establishing a scope change control plan.<\/li>\n\n\n\n<li>A project cost overrun is calculated by dividing the difference between the actual and budgeted costs by the budgeted cost, then multiplying by 100 to get the percentage.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 id=\"what-is-a-cost-overrun\" class=\"wp-block-heading\">What is a cost overrun?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>A cost overrun occurs when the actual expenses of a project exceed the planned (or budgeted) amount.<\/strong> Cost overruns are a persistent issue across industries, often leading to team stress, strained stakeholder relationships, and reduced profitability.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"custom-btn wp-block-paragraph\"><a href=\"https:\/\/app.clockify.me\/en\/signup\">Track costs in Clockify<\/a><\/p>\n\n\n\n<h3 id=\"project-cost-overrun-examples\" class=\"wp-block-heading\">Project cost overrun examples<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Here are some examples of project cost overruns in the software, marketing, and construction industries.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example #1: Software industry<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A software team builds a mobile app for an initial budget of $50,000. During development, the client requests new features \u2014 push notifications and advanced search options \u2014 that weren\u2019t in the original scope. These changes require extra development and testing time. As a result, the final cost increases to $70,000, leading to a budget overrun.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example #2: Marketing industry<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A client hires a marketing team to create a social media campaign with a $15,000 budget. During project execution, the team decides to produce extra video content to increase reach. These activities weren\u2019t part of the original scope. Consequently, the total project cost increases to $18,000.&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example #3: Construction industry<\/strong>&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A realistic example of a cost overrun in construction projects is an overrun caused by adverse weather conditions.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A construction team is hired to build an apartment building for an initial budget of $2 million. However, the project is affected by weeks of heavy rain, which have delayed certain outdoor tasks. Because of the delays, the team incurs extra labor and equipment rental expenses. This leads to a cost overrun, bringing the actual budget to $2.3 million.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\n<div class=\"banner banner-dark clockify-gradient-default\">\n    <div class=\"banner-text lg:pr-[6rem]\">\n        <span class=\"h4 text-lg translation-block mb-0\">Time &amp; Expense Tracker<\/span>\n        <p class=\"translation-block mt-1 mb-3\">Accurately track billable hours and record project-related expenses with Clockify by CAKE.com.<\/p>\n\n        <div class=\"banner-buttons d-flex gap-4 align-items-center translation-block justify-content-center justify-content-sm-start\">\n            <a class=\"bg-white rounded px-3 py-1 text-gray-dark\" href=\"https:\/\/app.clockify.me\/en\/signup\" target=\"_blank\">Sign up<\/a>\n\n                            <a class=\"button-2\" href=\"https:\/\/clockify.me\/time-expense-tracking\" target=\"_blank\">Learn more<\/a>\n                    <\/div>\n    <\/div>\n\n    <div class=\"banner-image banner-image-middle \">\n        <picture>\n            <source srcset=\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/default@2x.png 2x\" alt=\"Illustration\"  media=\"(min-width: 1022px)\" \/>\n            <img decoding=\"async\" src=\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/default.png\"  alt=\"Illustration\" \/>\n        <\/picture>\n    <\/div>\n<\/div>\n    <\/p>\n\n\n\n<h2 id=\"main-causes-of-cost-overrun\" class=\"wp-block-heading\">Main causes of cost overrun<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cost overruns can occur for many reasons, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Inaccurate cost estimation <\/strong>\u2014 It usually stems from over-optimism and insufficient historical data. Inaccurate estimates become visible earlier when you <a href=\"https:\/\/clockify.me\/task-tracker-app\">track time per task<\/a> from day one, allowing you to compare estimated vs. actual hours at any point in the project.<\/li>\n\n\n\n<li><strong>Scope creep<\/strong> \u2014 It happens when a project\u2019s tasks or requirements gradually exceed the original project plan. Time tracking data can show that certain activities (e.g., small client requests) consistently take longer than anticipated. This helps teams identify and address scope creep early.<\/li>\n\n\n\n<li><strong>Inadequate <\/strong><a href=\"https:\/\/clockify.me\/learn\/resources\/effective-resource-planning\/\"><strong>resource planning<\/strong><\/a> \u2014 The lack of real-time visibility into team capacity often results in some members being overloaded while others are underutilized. Also, assigning tasks to members who lack the necessary skills can cause inefficiencies, missed deadlines, and wasted spending.<\/li>\n\n\n\n<li><strong>Communication issues<\/strong> \u2014 Misunderstood project requirements and ineffective team collaboration can lead to rework, delays, and ultimately a cost overrun.<\/li>\n\n\n\n<li><strong>Poor risk management<\/strong> \u2014 Failure to identify and mitigate risks early (e.g., technical challenges) can result in unexpected costs. That\u2019s why having a risk management plan with clear mitigation strategies is essential.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Inflation<\/strong> \u2014 According to <a href=\"https:\/\/pmc.ncbi.nlm.nih.gov\/articles\/PMC10875576\/\" target=\"_blank\" rel=\"noreferrer noopener\">research on construction project costs<\/a>, changes in the prices of materials, labor, and equipment significantly contribute to budget overruns.<\/li>\n\n\n\n<li><strong>Supply chain disruptions<\/strong> \u2014 Raw material shortages and delivery issues can lead to project delays. They often force managers to seek alternative suppliers or pay premium prices for rushed orders.<\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group pro-tip\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">\ud83d\udca1 <strong>CLOCKIFY PRO TIP<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Want to improve your project management? Find useful tips and tools in our article:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/clockify.me\/blog\/productivity\/project-management-techniques\/\">Project Management Techniques and Tools: Definitions and Tips<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<h2 id=\"how-to-prevent-cost-overruns\" class=\"wp-block-heading\">How to prevent cost overruns<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here are the steps every project manager should take to avoid project budget overruns.<\/p>\n\n\n\n<h3 id=\"prevention-step-1-start-with-a-solid-plan\" class=\"wp-block-heading\">Prevention step #1: Start with a solid plan<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To be effective, a project plan has to include:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Accurate project budget,<\/li>\n\n\n\n<li>Clear scope statement,<\/li>\n\n\n\n<li>Detailed schedule,<\/li>\n\n\n\n<li>Communication plan, and<\/li>\n\n\n\n<li>Risk management plan.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If unsure how to determine your project budget, use the <strong>3-point estimating technique<\/strong>. It considers optimistic, pessimistic, and most likely cost scenarios to arrive at an estimate. This way, you get a balanced figure that\u2019s less likely to be off.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To reduce financial risks, you can also establish a <a href=\"https:\/\/www.merriam-webster.com\/dictionary\/contingency%20fund\" target=\"_blank\" rel=\"noreferrer noopener\">contingency fund<\/a>. Set aside extra money \u2014 typically 10-20% of the total project cost \u2014 to cover unforeseen expenses that may arise during project execution.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Regarding your project scope, it\u2019s best to organize it by using a <a href=\"https:\/\/www.coursera.org\/articles\/work-breakdown-structure\" target=\"_blank\" rel=\"noreferrer noopener\">Work Breakdown Structure<\/a> (WBS). You break down the scope hierarchically into smaller components:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Phases,<\/li>\n\n\n\n<li>Tasks,<\/li>\n\n\n\n<li>Subtasks,<\/li>\n\n\n\n<li>Deliverables, and<\/li>\n\n\n\n<li>Work packages (the smallest units of work that can be assigned to members).<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This makes the project more digestible.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In addition to the project goals and deliverables, you need to define task durations, deadlines, and responsibilities. This way, everyone knows what they need to do and when.<\/p>\n\n\n\n<div class=\"wp-block-group pro-tip\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">\ud83d\udca1 <strong>CLOCKIFY PRO TIP<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To set clear and realistic project objectives, you can use the SMART criteria framework. Learn more here:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/clockify.me\/blog\/productivity\/smart-goals\/\">How to Set SMART Goals (+ Examples and Templates)<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Your communication plan should outline:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How you\u2019ll share project information (via <a href=\"https:\/\/pumble.com\/learn\/pumble\/best-team-chat-apps\/\" target=\"_blank\" rel=\"noreferrer noopener\">team chat app<\/a>, email, meetings),&nbsp;<\/li>\n\n\n\n<li>Who\u2019ll share it (project manager, team leads) and when, and&nbsp;<\/li>\n\n\n\n<li>Who\u2019ll receive it (team members, sponsors, clients).&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This improves transparency and decision-making.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As for your risk management plan, it should include steps to identify and address potential risks, along with who\u2019s responsible for handling them. That way, project threats (e.g., a resource shortage) can be managed proactively.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s a good idea to create the project plan collaboratively. Our powerful time tracker, <a href=\"https:\/\/clockify.me\/\">Clockify<\/a> by <a href=\"https:\/\/cake.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">CAKE.com<\/a>, lets you share reports so your collaborators (e.g., key stakeholders) can see tracked time and expenses in real time.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"429\" height=\"374\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Sharing-reports-in-Clockify.webp\" alt=\"Sharing reports in Clockify\" class=\"wp-image-38046\" srcset=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Sharing-reports-in-Clockify.webp 429w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Sharing-reports-in-Clockify-344x300.webp 344w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Sharing-reports-in-Clockify-14x12.webp 14w\" sizes=\"auto, (max-width: 429px) 100vw, 429px\" \/><figcaption class=\"wp-element-caption\">Sharing reports in Clockify<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">Once you have your project plan in place, you can begin work on the project.<\/p>\n\n\n\n<h3 id=\"prevention-step-2-look-for-cost-overrun-warning-signs\" class=\"wp-block-heading\">Prevention step #2: Look for cost overrun warning signs<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Even with thorough planning, budget overruns can still happen. That\u2019s why you need to stay alert throughout the project and watch for warning signs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here are key red flags that signal a potential cost overrun:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Your team\u2019s unable to reach milestones on time,<\/li>\n\n\n\n<li>Communication among team members is infrequent or unclear,<\/li>\n\n\n\n<li>The project scope is unexpectedly growing,<\/li>\n\n\n\n<li>Some tasks need rework due to mistakes or change requests,<\/li>\n\n\n\n<li>Your spending progresses faster than the planned burn rate, and<\/li>\n\n\n\n<li>You\u2019re experiencing a negative <a href=\"https:\/\/www.accountingtools.com\/articles\/what-is-a-cost-variance.html\" target=\"_blank\" rel=\"noreferrer noopener\">cost variance<\/a> early in the project (you\u2019ve spent more than the budgeted amount for the work completed).&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Time tracking tools like Clockify can help you identify cost overrun warning signs early on. For instance, <a href=\"https:\/\/clockify.me\/help\/projects\/forecasting\">Clockify\u2019s Forecasting<\/a> predicts your project performance by showing you:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Estimated time \u2014 the time it would take to complete the project based on your estimates,<\/li>\n\n\n\n<li>Scheduled time \u2014 the time you scheduled when assigning tasks to team members,&nbsp;<\/li>\n\n\n\n<li>Completed time \u2014 the time tracked by team members thus far, and<\/li>\n\n\n\n<li>Forecasted time \u2014 the project\u2019s expected completion time based on hours tracked by that point.<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"638\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Forecasting-in-Clockify-e1779200913550.webp\" alt=\"Forecasting in Clockify\" class=\"wp-image-38043\"\/><figcaption class=\"wp-element-caption\">Forecasting in Clockify<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">To ensure the forecasted time doesn\u2019t exceed the estimated time, <a href=\"https:\/\/clockify.me\/help\/projects\/alerts\">enable project alerts<\/a>. You\u2019ll get an email notification when the project reaches a set percentage of the estimated time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can also track project progress in Clockify by using budget estimates. In this case, you\u2019ll get notified when a project reaches a set percentage of its estimated budget.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"355\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Alerts-in-Clockify-e1779200882321.webp\" alt=\"Alerts in Clockify\" class=\"wp-image-38038\"\/><figcaption class=\"wp-element-caption\">Alerts in Clockify<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">By detecting cost overrun warning signals in the beginning stages of your project, you can implement measures to ensure your project stays within budget.<\/p>\n\n\n\n<p class=\"custom-btn wp-block-paragraph\"><a href=\"https:\/\/app.clockify.me\/en\/signup\">Track project budget in Clockify<\/a><\/p>\n\n\n\n<h3 id=\"prevention-step-3-devise-a-scope-change-control-plan\" class=\"wp-block-heading\">Prevention step #3: Devise a scope change control plan<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To manage scope creep effectively, you\u2019ll need a robust change control plan. A typical change management process includes these steps:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Identify<\/strong> the change,<\/li>\n\n\n\n<li><strong>Determine<\/strong> the goals of the change,<\/li>\n\n\n\n<li><strong>Define<\/strong> the timeline of change implementation, and<\/li>\n\n\n\n<li><strong>Assemble<\/strong> a team in charge of change management.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">When a new client request emerges, make sure to document that alteration \u2014 not just discuss it informally. This prevents the change from going unnoticed in the project.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s also crucial that you understand the purpose of a change \u2014 whether it\u2019s to improve product quality or meet new client expectations. In fact, teams should be careful when making improvements, as it can easily lead to complications.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Founder of a platform focused on browser-based tools, <a href=\"https:\/\/www.linkedin.com\/in\/allinonetools\/\" target=\"_blank\" rel=\"noreferrer noopener\">Bhavin Sheth<\/a>, shared the problems he experienced due to chasing perfection in project development:<\/p>\n\n\n\n<div class=\"wp-block-columns pro-blockquote is-layout-flex wp-container-core-columns-is-layout-8f761849 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"800\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Bhavin-Sheth-Founder-of-a-platform-focused-on-browser-based-tools.webp\" alt=\"Bhavin Sheth Founder of a platform focused on browser-based tools\" class=\"wp-image-38039\" srcset=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Bhavin-Sheth-Founder-of-a-platform-focused-on-browser-based-tools.webp 800w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Bhavin-Sheth-Founder-of-a-platform-focused-on-browser-based-tools-300x300.webp 300w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Bhavin-Sheth-Founder-of-a-platform-focused-on-browser-based-tools-630x630.webp 630w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Bhavin-Sheth-Founder-of-a-platform-focused-on-browser-based-tools-768x768.webp 768w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Bhavin-Sheth-Founder-of-a-platform-focused-on-browser-based-tools-12x12.webp 12w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><em>\u201cOne situation I remember was when I kept improving a feature beyond the original requirement. It did not break the project, but it delayed the launch and increased the effort more than expected.\u201d<\/em><\/p>\n<\/div>\n<\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Defining how long a scope change will take is also important. It allows managers to adjust the project schedule more effectively.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Finally, you should form a team responsible for analyzing and approving changes to your project scope. This type of team usually consists of:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Project manager,&nbsp;<\/li>\n\n\n\n<li>Subject matter experts, and<\/li>\n\n\n\n<li>Sponsors.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Having a change management team ensures every scope modification is properly reviewed before implementation. This helps you maintain control over the scope and reduce unnecessary costs.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To <strong>detect scope expansion early<\/strong>, you should track time per project task. With Clockify, your team can track their time spent on tasks, and you can later analyze data in reports. By doing so, you get to spot tasks that are taking longer than planned and take action to prevent further inefficiencies.<\/p>\n\n\n\n<figure class=\"wp-block-embed aligncenter is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"How Timekeeping Works in Clockify | Guide\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/z01wrJagxMI?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<h2 id=\"how-to-deal-with-project-cost-overruns\" class=\"wp-block-heading\">How to deal with project cost overruns<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When a budget overrun is in progress, you need to take immediate action to minimize its impact and get the project back on track. Here are the steps you should take.<\/p>\n\n\n\n<h3 id=\"recovery-step-1-audit-your-spending\" class=\"wp-block-heading\">Recovery step #1: Audit your spending<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Reviewing your spending will help you understand where the money has gone. Specifically, it\u2019ll help you identify what drove the overrun and pinpoint inefficiencies in resource usage.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To check how your team spends their time across tasks and projects, use <a href=\"https:\/\/clockify.me\/help\/reports\/summary-report\">Clockify\u2019s Summary report<\/a>. Here, you get to see:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Time spent on each task,&nbsp;<\/li>\n\n\n\n<li>Estimated time for each task, and<\/li>\n\n\n\n<li>Amounts earned.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This way, you can spot <strong>where your team\u2019s tracked hours diverged from estimates<\/strong>.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"382\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/See-project-estimates-in-Clockifys-Summary-report-e1779201002135.webp\" alt=\"See project estimates in Clockify\u2019s Summary report\" class=\"wp-image-38045\"\/><figcaption class=\"wp-element-caption\">See <a href=\"https:\/\/clockify.me\/help\/projects\/tracking-project-progress#estimates-in-reports\">project estimates<\/a> in Clockify\u2019s Summary report<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\">Say you notice that certain tasks consume more time than expected. In that case, you can find ways to improve your team members\u2019 efficiency or reallocate tasks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Once you determine the root cause of the overrun, update your budget to establish a realistic financial roadmap for the rest of the project.<\/p>\n\n\n\n<div class=\"wp-block-group pro-tip\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">\ud83d\udca1<strong> CLOCKIFY PRO TIP<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Learn more about the importance of precise time estimation in project management here:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/clockify.me\/blog\/business\/make-precise-time-estimates\/\">Time Estimation in Project Management Full Guide (+ Tips)<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<h3 id=\"recovery-step-2-reforecast-the-project-budget\" class=\"wp-block-heading\">Recovery step #2: Reforecast the project budget<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To reforecast your project budget, you need to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Estimate<\/strong> costs of the remaining work,&nbsp;<\/li>\n\n\n\n<li><strong>Factor<\/strong> in any changes to scope, resources, or prices, and&nbsp;<\/li>\n\n\n\n<li><strong>Recalculate<\/strong> the expected final project cost.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Basically, you create a realistic financial forecast based on the current project conditions (rather than relying on the original plan). This allows for better decisions and planning.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h3 id=\"recovery-step-3-increase-stakeholder-communication\" class=\"wp-block-heading\">Recovery step #3: Increase stakeholder communication<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You should notify your stakeholders (project sponsors and client) of a cost overrun as soon as possible. This way, they have enough time to understand the situation, ask questions, and make informed decisions (e.g., whether they\u2019ll approve additional budget or reduce the project scope).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Essentially, you must inform stakeholders about:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Current overrun status,<\/li>\n\n\n\n<li>Causes of the overrun, and<\/li>\n\n\n\n<li>Expected impact on the project\u2019s budget and timelines, as well as proposed actions to address it.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">When a cost overrun becomes an issue, ignoring it often feels like the only option. However, according to <a href=\"https:\/\/www.linkedin.com\/in\/naybour\/\" target=\"_blank\" rel=\"noreferrer noopener\">Paul Naybour<\/a>, the founder of a project management training company, discussing the overrun is imperative:&nbsp;&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-columns pro-blockquote is-layout-flex wp-container-core-columns-is-layout-8f761849 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"800\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Paul-Naybour-Founder-of-a-project-management-training-company.webp\" alt=\"Paul Naybour Founder of a project management training company\" class=\"wp-image-38044\" srcset=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Paul-Naybour-Founder-of-a-project-management-training-company.webp 800w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Paul-Naybour-Founder-of-a-project-management-training-company-300x300.webp 300w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Paul-Naybour-Founder-of-a-project-management-training-company-630x630.webp 630w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Paul-Naybour-Founder-of-a-project-management-training-company-768x768.webp 768w, https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Paul-Naybour-Founder-of-a-project-management-training-company-12x12.webp 12w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<p class=\"wp-block-paragraph\">\u201c<em>The worst thing to do in such a situation would be to pray that everything will work out just fine. Instead, discuss what happened, provide realistic estimates, and suggest potential actions: descope, postpone, or increase the budget, along with the consequences of each one.<\/em>\u201d<\/p>\n<\/div>\n<\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">By being open with your stakeholders and presenting solutions \u2014 not just problems \u2014 you\u2019ll maintain trust. You\u2019ll also increase the chances of bringing your project back under control.&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h3 id=\"recovery-step-4-implement-cost-controls\" class=\"wp-block-heading\">Recovery step #4: Implement cost controls<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To prevent further overspending, you should take certain measures:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Put<\/strong> a freeze on all non-essential expenses (e.g., non-critical training),<\/li>\n\n\n\n<li><strong>Renegotiate<\/strong> vendor contracts (or explore cheaper alternatives for materials), and<\/li>\n\n\n\n<li><strong>Move<\/strong> resources from low- to high-priority activities.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Furthermore, you should focus on cutting no-value work. According to an <a href=\"https:\/\/easychair.org\/publications\/paper\/bZzW\/open\" target=\"_blank\" rel=\"noreferrer noopener\">article on lessons learned from construction projects<\/a>, gold plating (or adding unrequested features to a project to impress a client) is often counterproductive and leads to unnecessary costs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By implementing strong cost controls, you\u2019ll minimize waste and protect the remaining project budget.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h2 id=\"how-to-calculate-cost-overrun\" class=\"wp-block-heading\">How to calculate cost overrun<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To calculate a cost overrun (in percentages), use the formula below:<\/p>\n\n\n\n<p class=\"has-text-align-center has-background wp-block-paragraph\" style=\"background-color:#e1f5fe\">[(Actual project expenses &#8211; Budgeted amount) \u00f7 Budgeted amount] x 100 = Project cost overrun percentage<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Say your actual project expenses amount to $10,000 (determined based on your team\u2019s tracked hours and their labor rates). We\u2019ll also say your budgeted amount equals $8,000. Here\u2019s how you\u2019ll calculate your project cost overrun:<\/p>\n\n\n\n<p class=\"has-text-align-center has-background wp-block-paragraph\" style=\"background-color:#e1f5fe\">[($10,000 &#8211; $8,000) \u00f7 $8,000] x 100 = [$2,000 \u00f7 $8,000] x 100 = 0.25 x 100 = 25% over budget&nbsp;<\/p>\n\n\n\n<h2 id=\"monitor-project-progress-and-track-expenses-with-clockify-by-cake-com\" class=\"wp-block-heading\">Monitor project progress and track expenses with Clockify by CAKE.com<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">As a time and expense tracking tool, Clockify can help you keep project costs in check. Using a time tracking app in addition to your usual <a href=\"https:\/\/plaky.com\/blog\/how-to-choose-project-management-software\/\" target=\"_blank\" rel=\"noreferrer noopener\">project management software<\/a> helps you detect potential cost overruns early.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That\u2019s because, in many cases, <strong>time delays increase project costs<\/strong>. By having your team track project time on each task, you\u2019ll be able to detect any potential time overruns and prevent them.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Additionally, you can have your team account for all project expenses by adding them in Clockify. When <a href=\"https:\/\/clockify.me\/help\/track-time-and-expenses\/expenses#add-expenses\">adding new expenses<\/a>, the team can specify the cost type and amount, and attach receipts.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"464\" height=\"600\" src=\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2026\/05\/Creating-an-expense-in-Clockify-e1779200856968.webp\" alt=\"Creating an expense in Clockify\" class=\"wp-image-38042\"\/><figcaption class=\"wp-element-caption\">Creating an expense in Clockify<\/figcaption><\/figure>\n<\/div>\n\n\n<p class=\"custom-btn wp-block-paragraph\"><a href=\"https:\/\/app.clockify.me\/en\/signup\">Try Clockify by CAKE.com today<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">With Clockify, managers can:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Create as many projects and tasks as they want,<\/li>\n\n\n\n<li>Track billable and non-billable hours,<\/li>\n\n\n\n<li><a href=\"https:\/\/clockify.me\/help\/projects\/project-filter#project-and-task-favorites\">Favorite projects and tasks<\/a> for easier workflow, and&nbsp;<\/li>\n\n\n\n<li>Hide tracked time and expenses from regular users for better control over data.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This way, you can bill clients accurately and maintain efficient daily operations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To boost your team\u2019s productivity, try the <a href=\"https:\/\/cake.com\/bundle\" target=\"_blank\" rel=\"noreferrer noopener\">CAKE.com Bundle<\/a>. Alongside Clockify, you\u2019ll get <a href=\"https:\/\/pumble.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Pumble<\/a> \u2014 an effective communication app, and <a href=\"https:\/\/plaky.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Plaky<\/a> \u2014 a user-friendly project management software, at 53% off.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\n<div class=\"banner banner-dark clockify-gradient-bundle\">\n    <div class=\"banner-text lg:pr-[6rem]\">\n        <span class=\"h4 text-lg translation-block mb-0\">Productivity Suite<\/span>\n        <p class=\"translation-block mt-1 mb-3\">Use a cost-effective productivity suite to track employee time and plan resources, communicate internally, and organize your work.<\/p>\n\n        <div class=\"banner-buttons d-flex gap-4 align-items-center translation-block justify-content-center justify-content-sm-start\">\n            <a class=\"bg-white rounded px-3 py-1 text-gray-dark\" href=\"https:\/\/cake.com\/bundle\" target=\"_blank\">Get Bundle<\/a>\n\n                            <a class=\"button-2\" href=\"https:\/\/cake.com\/suite\" target=\"_blank\">Learn more<\/a>\n                    <\/div>\n    <\/div>\n\n    <div class=\"banner-image banner-image-bottom \">\n        <picture>\n            <source srcset=\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/bundle@2x.png 2x\" alt=\"Illustration\"  media=\"(min-width: 1022px)\" \/>\n            <img decoding=\"async\" src=\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/bundle.png\"  alt=\"Illustration\" \/>\n        <\/picture>\n    <\/div>\n<\/div>\n    <\/p>\n\n\n\n<h2 id=\"faqs-about-cost-overruns\" class=\"wp-block-heading\">FAQs about cost overruns<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In the next section, you can find answers to some frequently asked questions about budget overruns.<\/p>\n\n\n\n<h3 id=\"what-causes-cost-overrun\" class=\"wp-block-heading\">What causes cost overrun?&nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A cost overrun is usually caused by inaccurate cost estimation, poor planning, ineffective communication, and price fluctuations (inflation).<\/p>\n\n\n\n<h3 id=\"how-to-avoid-cost-overrun\" class=\"wp-block-heading\">How to avoid cost overrun?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To avoid a cost overrun, teams should develop a comprehensive project plan, actively monitor for early warning signs, and ensure all scope changes are documented and controlled.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-group pro-tip\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">\ud83d\udca1 <strong>CLOCKIFY PRO TIP<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re struggling to make effective long and short-term plans, check out this article:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/clockify.me\/blog\/managing-tasks\/short-term-planning-and-long-term-planning\/\">The Differences Between Long-Term and Short-Term Planning<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<h3 id=\"how-to-manage-cost-overrun\" class=\"wp-block-heading\">How to manage cost overrun?&nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To manage a budget overrun, you should identify the root cause, assess its impact, and take corrective actions (e.g., by optimizing <a href=\"https:\/\/clockify.me\/blog\/managing-tasks\/track-resource-allocation\/\">resource allocation<\/a> and renegotiating vendor contracts).&nbsp;<\/p>\n\n\n\n<h3 id=\"how-do-you-calculate-overrun\" class=\"wp-block-heading\">How do you calculate overrun?&nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The formula for calculating your project cost overrun goes like this:<\/p>\n\n\n\n<p class=\"has-text-align-center has-background wp-block-paragraph\" style=\"background-color:#e1f5fe\">[(Actual project expenses &#8211; Budgeted amount) \u00f7 Budgeted amount] x 100 = Project cost overrun percentage<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For a calculation example with real numbers, refer to the <em>How to calculate cost overrun<\/em> section of this article.<\/p>\n\n\n\n<h3 id=\"who-pays-for-cost-overruns\" class=\"wp-block-heading\">Who pays for cost overruns?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The party responsible for cost overruns is typically the contractor, the client, or both, depending on the contract type.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In fixed-price contracts, the contractor agrees to deliver the project at a set price, so they usually bear the risk of cost overruns. With cost-plus contracts, the client generally bears the risk \u2014 they cover the actual project costs plus an additional fee for the contractor.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In hybrid contracts, cost overruns are typically shared between the contractor and the client (according to the agreed terms).&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-group pro-tip\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">\ud83d\udca1 <strong>CLOCKIFY PRO TIP<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A time-and-materials contract offers flexibility for unpredictable projects, but it also requires detailed cost tracking and a high level of trust between the client and the contractor. Learn more about this contract type in the resource below:&nbsp;&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/clockify.me\/learn\/business-management\/time-materials-contract\/\">A Time and Materials Contract (T&amp;M): What Is It and When To Use It<\/a>&nbsp;&nbsp;&nbsp;<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<h3 id=\"what-is-another-name-for-a-cost-overrun\" class=\"wp-block-heading\">What is another name for a cost overrun?&nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A cost overrun is also known as a budget overrun, cost increase, or a budget exceedance.&nbsp;<\/p>\n\n\n\n<h3 id=\"what-is-the-difference-between-cost-escalation-and-cost-overrun\" class=\"wp-block-heading\">What is the difference between cost escalation and cost overrun?&nbsp;<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cost escalation refers to an anticipated increase in project costs due to inflation, market shifts, or other external factors. Conversely, a cost overrun is when total project costs exceed the initial budget unexpectedly, regardless of cause.&nbsp;<\/p>\n\n\n\n<h3 id=\"what-is-cost-overrun-or-underrun\" class=\"wp-block-heading\">What is cost overrun or underrun?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A cost overrun happens when the actual project costs exceed the budgeted amount. A cost underrun occurs when they come in below the budget.&nbsp;<\/p>\n\n\n\n<p class=\"custom-btn wp-block-paragraph\"><a href=\"https:\/\/app.clockify.me\/en\/signup\">Get started with Clockify<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A project cost overrun happens when the project costs exceed the budget estimate. Here\u2019s how to avoid it.<\/p>\n","protected":false},"author":50,"featured_media":38118,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-27823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"acf":[],"_links":{"self":[{"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/posts\/27823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/users\/50"}],"replies":[{"embeddable":true,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/comments?post=27823"}],"version-history":[{"count":15,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/posts\/27823\/revisions"}],"predecessor-version":[{"id":38278,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/posts\/27823\/revisions\/38278"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/media\/38118"}],"wp:attachment":[{"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/media?parent=27823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/categories?post=27823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clockify.me\/blog\/wp-json\/wp\/v2\/tags?post=27823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}