Planning a project budget is a crucial component, it is the very essence of a project.
The concept is straightforward: if you do not have funds, you cannot successfully complete a project.
That’s why when you allocate a budget for your project, you need to spend as much time as possible to carry out a thorough job and define a budget that is as accurate as possible.
This will ensure that the project, the project manager and the team are successful.
What is a project budget?
A project budget is the sum of the estimated costs required to complete a project within a given period of time.
It is used to estimate what the project costs will be in each phase.
The project budget will include different factors as the cost of the job, the costs of supplying of the materials, the operational costs, etc…
Please note that the project budget is not a fixed value and a static document.
This amount will in fact be revised and restored during the plan life cycle and adjusting and modifying itself gradually as the plan evolves according to the various expenses and necessities.
The budget is the engine that drives the funding of a project and communicates to stakeholders how much money is needed, when it is needed and why it is needed.
But it is not just a means to obtain what the project requires; the other thing that makes a project budget crucial is that it is a tool to control the costs of the project.
How to create a project budget?
As already stated above, there are many different factors involved in creating a budget such as, for example, fixed and variable costs, manpower, direct and indirect costs, materials and licenses, etc.
Also, there are several ways to create a project budget.
To meet all these different needs and project requirements, a budget must be created with the highest commitment and care.
So here are 7 main tips for preparing a successful project budget.
1. Make use of history and data from previous projects
The new project we are addressing is neither the first nor the last one that is trying to reach a milestone or a specific goal in the market.
This is why, before starting any work on the new project, it is worth taking a look at all similar successful projects of the past and their related budgets.
Historical data can also help to pinpoint errors that may have led to spending more money than necessary in the past and, therefore, to avoid them.
2. Get in touch with experts
Regardless of what the problem or industry is, there will be experienced people everywhere who possess many years of experience.
These people often know the market like the back of their hand, they know where the opportunities are and what the potential risks are.
So in order to create a successful budget, it is sometimes necessary to contact these “gurus” to get precious information.
Alternatively, check out our blog which is packed with information and specific articles.
3. Confirm data accuracy
After having prepared the long-awaited budget document, you need to make sure that all the statistical data included in it are correct.
During the development phase, in fact, you cannot afford gross errors such as a misreported number or an incorrect evaluation because they could lead to a fatality – even a very serious one – in the long term.
4. Keep your budget dynamic
Now and then, the company’s needs and resources will change and, as a result, so will the budget.
Project management is a dynamic discipline and, consequently, the budget dedicated to each individual project must also be dynamic.
So, when the time comes to make changes to the project, it is therefore important to make sure that these changes are carried over to the budget as well.
An extra advice is to provide a buffer, containing a certain amount (initially discussed and agreed upon) to face any changes that require a budget increase.
5. Update your budget in real time
Speaking of budget changes, the project manager must ensure that the budget is always updated in real time.
One mistake to avoid is to postpone the update of costs and expenses – maybe because it’s lunch break -because you might forget about it.
6. Use a project management software
The project manager has one job: keeping all project activities under control.
So what better way to do this than using a great project management software?
With this, the project manager will not only be able to have an overview of the whole project, but also to have the budget at hand anytime.
With TWproject’s project management software you will not eliminate the risk of cost overruns, but can help you manage them.
Therefore, preparing a project budget is a delicate task: and above all, it is an element that follows the evolution of the project throughout all its phases.
The project manager needs to be always vigilant, they must never let their guard down! Our software is developed for this reason: to be a valuable and efficient tool for your project’s success.