You are the project manager for a software development project. The project team has estimated that the project will cost $250,000, and the sponsor has approved this budget. However, during the project's execution, you notice that the actual costs are starting to exceed the budget, and the project is at risk of going over budget. 

What steps would you take to effectively manage project costs, and how would you communicate this to the project sponsor and other stakeholders to ensure the project's success?