If a project is compared to a car, then the budget is its fuel. Just as a car needs gas, a project needs money and resources to keep it running. As a project manager, you should try to plan and use these resources in the most efficient way to keep the project delivered on time.
A project budget is a plan that details how much money will be spent, what it will be used for, and when. If you plan your budget ahead of time and use it throughout the project to monitor spending, you can reduce the likelihood of resources running out or going over budget.
9 steps to creating a project budget
Budgeting a project can be done in a series of steps:
1.Set project goals.
Project goals are a good start, can help you understand the direction of your work, and serve as a guiding light when developing a project plan.
To write clear goals, use the SMART approach, which is specific, measurable, achievable, realistic, and time-bound. For example, if you want to increase traffic, you can set a goal like this:"By the end of the quarter, there was a 10% increase in effective traffic to your Page"。
2.Determine the scope of the project.
The project scope sets boundaries for the project, such as what work is to be done or not to be done, as well as the duration of the work and deliverables.
When scoping your project, consider the following:
Available Resources:
Before you decide on specific deliverables to target, take stock of the resources available. If there is a hard cap on the budget or the project team has limited bandwidth, you may need to adjust your deliverables accordingly.
Time Limit:
Tight project schedules can impact resource costs. For example, if you have a tight deadline, you may need employees to work overtime or hire more staff to complete it.
Non-objective: What's outside the scope of the project?It can be helpful to identify goals that you don't plan to achieve so you can avoid scope creep and potential overruns.
3.Break down deliverables into subdependencies.
Next, list all project-scoped deliverables and break them down into subdependencies. This approach can help you factor in all hidden project costs when creating a budget.
If you prefer the form of a diagram, you can try creating a work breakdown structure (WBS). This visual tool breaks down the work into multiple levels, with the main goal at the top and the deliverables and subdependencies below.
4.Make a list of the resources you need.
Be as specific as possible about the resources you need for each project, remember"Resources"Not just people or equipment, but can also include overhead costs such as training or physical workspace. Some common project cost categories are: team members, procurement, training, equipment, professional services, and so on.
5.Estimate the amount.
At the end of the day, a budget is an estimate of the cost. While we can't do the future, there are a few ways to help you make the most accurate estimate possible.
Estimate and summarize the cost of each individual part.
Work backwards from a fixed amount.
Compare budgets for similar projects.
Consider different scenario variables.
You don't have to stick to one approach, you can combine them to suit your unique project situation.
6.Reserve for contingencies**.
Sometimes, unexpected things happen during a project. When plans change, contingency reserves can provide additional support to your budget. A common recommendation is to set aside 5%-10% of the total budget as a contingency reserve.
Budgeting is an estimating process, so contingencies** should always be included.
7.Create a budget document.
There are a few key parts that need to be included in creating an actual budget document:
A breakdown of each deliverable, sub-deliverable and resource requirements, as well as the expected cost of each outcome.
How long each resource needs to be used and the timeline of how much money is expected to be spent.
The person in charge of each budget component. For example, you can indicate that your assistant is responsible for the team's hours and performance.
Clearly record which portion of the company's budget each line item will draw money from. For example, you can use the budget of your marketing department to create ads and the budget of your IT department to upgrade your computer.
The total amount of expenditure for the entire project. If applicable, a separate total of the departmental budget to be used should also be included.
Once the project is initiated, track the actual cost compared to the budgeted cost.
8.Have a plan to monitor your spending.
Plan ahead to keep an eye on how often actual and budgeted costs are kept in mind so you can nift potential problems before they become worse. You can also decide in advance what to do if you go over (or under) your budget.
9.Obtain approval from key stakeholders
Once you have a project budget plan, you should share it with project stakeholders and ask them to sign it off. You should have a detailed plan that gives the approver a clear picture of how each line will contribute to the achievement of the project objectives.
Project budget management tools
It's also important to choose the right project budgeting management tool. The tool should make it easy for you to share and update budgets in real-time, so you can be sure that all team members are on the latest version.
The great thing about project management software is that 8Manage PM allows you to share, control, manage, and track budgets and schedules in real-time. For example, 8Manage PM's universal reporting feature automatically pulls data from your projects and displays spending, task status, and completed milestones in one place, so you don't have to struggle to figure out if you're on track.
Two-way work breakdown and time, resource, and cost planning.
Implement baselines that can be used to track task and project performance.
Continuously monitor the use of project time, resources, and funds.
Manage scope creep and demand changes, alert stakeholders.
Monitor project progress and performance, as well as time and cost spent on project completion.
With 8Manage PM, you can enter and sum itemized items, create custom fields, assign owners, and easily share information with teammates. In addition to the actual budget, you can iterate on past workflows, create process documents, and save project budget templates to make sure every step is missed.
Manage project budgets wisely
A well-designed budget helps you through the entire project lifecycle, including planning, approval, and execution. When with the help of 8Manage PMProject management softwareWhen you have a process in place to control spending, you can handle unexpected costs in a timely manner, build trust with budget approvers, and establish a solid record of successful projects.