Steps to a robust project budget
Let’s face it, projects cost money, and proper money management requires strong budgeting to ensure everything goes according to plan. There are direct and indirect costs, fixed and variable costs, labor and materials, travel, equipment, rent and more, capturing each item can be a challenge. Invariably an item arises from left field to add to the financial complexity.
Without sufficient funds, the project will not be completed successfully, regardless of how hard you try. That’s why project planning and budget is so important: it’s the lifeblood of the project. To assist you in securing the funds necessary to support the project through every phase, there are steps which should be taken.
A project budget 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, material procurement and operating costs. But it’s not a static document; the project budget will be reviewed and revived throughout the life of the project.
The budget is needed because projects cost money, but it’s more than just that. The budget is the engine that drives project’s funding, communicates to stakeholders how much money is needed and when it’s needed.
But it’s not only a means to get things a project requires, such as a team, equipment etc. it’s also an instrument to control project costs. The budget is a plan, which acts as a baseline to measure performance as the actual costs are collected once the project has been started.
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, there are seven essential steps towards creating and managing project budget:
The use of historical data, looking back at similar projects and their budgets is a great way to get a head start on building a budget. To further elaborate on historical data, learn from their successes and mistakes. It provides a clear path that leads to more accurate estimates. It may also cover how changes were addressed to keep the budget under control.
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 stay on track and avoid unnecessary pitfalls.
Once the budget information is available, there is still some work to do, take a look at it and make sure figures are accurate. During the project is not the time to find a typo. Also a good time to seek those experts and other project team members to check the budget and make sure it’s right.
The project budget is the baseline by which progress will be measured once started. It is a tool to gauge the variance of the project. It is best to re-baseline as changes occur in the project. Once the change control board approves any change it will need to be re-baselined.
It is best to update the budget in real time when or if a change needs to be addressed. The use of cloud based software is helpful here otherwise valuable time is wasted.
Things change and projects go off track all the time. It’s the projects that get back on track faster that tend to be successful.
Managing project expenses using these building blocks should be a sound foundation for project’s success.
It’s clear that building an accurate budget is key to setting up a project for success. A well-put-together budget isn’t just for managing money. It can also act as a baseline to measure performance against the actual costs of the project as they become apparent. Let us know how you put together your project budgets; we would like to hear from you. All the very best on your project management journey.