Budgets – love them or hate them, they can be the pinnacle against which excellent projects are measured, or the single point of failure. At Asq, we’ve compiled our top 5 tips for managing your project budget. It’s not rocket science, but when you have so many competing priorities within a project, it’s often the simple things that can be forgotten.
Work with all stakeholders to fully explore all the costs, including the hidden ones. Dig deeper if certain parties say they can’t think of any additional or surprise costs – these are the ones that will often push a budget over the edge.
When you think you have all the costs covered, go back and question them again, things might have changed since you began scoping your project.
Ensure that stakeholders are aware of their responsibility to keep you updated of any changes to their estimates.
Discuss the projected budget with the steering committee and sponsor and get their buy-in to the budget before you progress.
Also, project budgeting is not like regular business budgeting in the sense that what they have quoted must be spent. Educate managers on ways to minimise costs where possible and avoid the dreaded ‘over budget’ discussion with the sponsor.
The project manager has overall responsibility for ensuring the project remains on target time wise and also in terms of budget. However, it is up to each party to monitor their own costs as the project progresses. This is where an excellent project scope and kick off meeting, with all stakeholders present, helps to set the scene and manage expectations from the outset.
It’s also the project manager’s job to be in the face of stakeholders asking where their portion of the budget is being spent to ensure it only goes on the approved resources.
Whether the project is being run by an in-house project manager or an outsourced consultant, it’s imperative that the project budget is developed and managed in line with your organisation’s financial management principles. If the project is run outside of your organisation’s delegated authority framework, or credit agreements, it could run into trouble very quickly – despite how smoothly the project might otherwise be going.
- Be realistic.
No project will ever run exactly as it should, including financially, so be realistic about expectations from the outset. If the maximum inflated costs would break your organisation, then the project is too risky. This isn’t to say that your project will go over budget to that extent, but it does mean that the risk is too much to compromise on and your scope might need readjustment.
- Learn your lessons
This doesn’t just apply to the budget elements of a project but it’s worth revisiting previous projects within your organisation to identify any possible financial pitfalls, and avoid them. It’s also a worthwhile exercise to make notes for next time; projects are a never-ending education for your company!