Setting up for Successful Project Budget
Funds are always needed to deliver a project, the amount received will depend if it will be delivered as scoped, successfully and to the stakeholders satisfaction. SO planning out the project budget is very important, as it’s the lifeblood of the project. The following discusses how to secure the funds necessary to support the project through every phase.
The first step is to define the project budget, which is the total projected costs needed to complete a project over a defined period of time. It’s used to estimate what the costs of the project will be for every phase of the project. The project budget will include such things as labor costs, material procurement costs and operating costs. But it’s not a static document.
The project budget will be reviewed, evolve and be revived throughout the project. In simple terms a project costs money, but there is much more to it than that. Because, the budget is the engine that drives the project’s funding. It communicates to stakeholders how much money is needed and when it’s needed. It’s not only a means to get things that the project requires, that is paying teams, buy or rent equipment and materials, however that’s only half the story.
The other part of the importance of a project budget is that it’s an instrument to control project costs. The budget is the plan, which acts as a baseline to measure performance as the actual costs is collected once the project has been started.
Being able to create a project budget is an art, there are many components necessary to build a budget, including direct and indirect costs, fixed and variable costs, labor and materials, travel, equipment and space, licenses and whatever else may impact project expenses.
To meet all the financial needs of the project, a project budget must be created thoroughly, not missing any aspect that requires funding. To do this, outlined are several essential steps towards creating and managing a project budget:
1. Use Historical Data
The current project is not likely to be the first to try and accomplish a specific objective or goal. Looking back at similar projects and their budgets is a great way to get a head start on building the budget.
2. Reference Lessons Learned
To further elaborate on historical data, learn from previous projects successes and mistakes. It provides a clear path that leads to more accurate estimates. It should also be able to provide information on how responses to change affected the budget.
3. Leverage Your Experts
Another resource to build a project budget is to tap those who have experience and knowledge—be they mentors, other project managers or experts in the field. Reaching out to those who have created budgets can help a project to stay on track and avoid unnecessary pitfalls.
4. Confirm Accuracy
Once the budget is in place, that is only the beginning, as the budget should be reviewed and ensure figures are accurate. During the project is not the time to find a typo. Seek out experts and other project team members to check the budget and make sure it’s right.
5. Baseline and Re-Baseline the Budget
The project budget is the baseline by which a project will be measured throughout the duration of the project. It is a tool to gauge the variance of the project. The budget should be re-baseline as changes occur within the project. Once the change control board approves any change then the budget can be re-baseline.
6. Update in Real Time
The sooner a change is identified, then the better for the outcome of the project. This can be better managed with the use of cloud based software which allows for real time changes and status updates.
7. Get on Track
The importance of having a project management software that tracks in real time, can easily provide information needed to get back on track sooner rather than later. Things change and projects go off track all the time. It’s the projects that get back on track faster that are successful. If project expenses are managed using these building blocks then a sound foundation will be set for a project’s success.
Once tasks are broken down for the project and the team in place. Next is to review materials which will be needed, that could be laptops, other devices and equipment, all must be accounted. When this is in place, other line items need to be addressed such as travel expenses and renting space to house the team. Then there are fixed items that are true for any project. These are things where the cost is set and will not change over the course of the project. There should also be an entry for any miscellaneous costs that doesn’t fit elsewhere in the budget.
The budget must have a forecast versus actual documented, as this is a way to track the expenditure to make sure the budget is on track.
It’s clear that building an accurate budget is key to setting up for a projects success. If a budget template is required it can be downloaded here. Please share your budget planning experience, it would be great to receive your input.