The success of a project depends a lot on the budget suggested. A little bit of misunderstanding can cause the entire project to go haywire and fail. Understanding the requirements of the project and what the stakeholders say is very important. What stakeholders say about the project often isn’t as simple as it may seem upfront. This can lead to unidentified goals, wrong planning, and expectations on both sides of the deal. If a project manager or team members don’t understand the stakeholders’ true desires, it’s almost impossible to identify what the requirements are for the project. And this can lead to the wrong budget allocation of the project.
All the project related details including the budget is defined by the stakeholders which comprise the deliverables, and other requirements too. So to effectively manage project budget organizations must ensure project requirements are accurately identified, documented and confirmed with all stakeholders. All the parties involved in the budget must be reported and informed. This vital step should be accomplished before budgets are set.
Besides these, there are 19 tips that every project manager must keep in mind to keep their project budget under control.
Here are the tips:
1. Let The Team Involved Set The Budget
When the time to estimate costs comes, be ready to involve the team who is responsible for the execution of the project. Get input from all applicable stakeholders as they know even the smallest expense that should be added in the final commercials. This is an important part of delivering a value quotation. All team members must be aware of the current budget status as well. Keep the project team well-versed of the project budget prediction. An informed team is a strong team that takes ownership of its projects. By keeping the team informed of the budget status, and collecting their views will create transparency and avoid future confusion.
2. Refer Your Project Task List
While making the commercials for any project first go for a well-defined list of the tasks that are essential to be executed. Make sure that those tasks cover the entire project and then start defining the cost of each task by estimations. If needed do a pilot so that you get an accurate estimation.
3. Take A Smaller Approach
Taking a smaller approach for creating the final budget acts as a baseline. Formally get the estimate signed off by the responsible authority and ensure that the actual funds get released and allocated to the project. You now have a baseline budget to work from. This baseline is an estimate and the methods used to estimate the cost of the project during the early stage are generally faster and consume fewer resources than those used to create detailed estimates in later stages. These estimates depend more on the expert decisions of experienced managers who are very accurate even with less information. This approach is made at the earliest stages of project selection which are generally based on information from previous projects.
4. Start With A Realistic Figure
Once you have created a baseline it’s time to ponder over and look at the previous projects, their commercials, resources used and how its’ budget was planned. Begin the budget preparation for the project by keeping a genuine ballpark figure in your mind. Ask the experts and all the stakeholders that what expenses are to be included in the same.
5. Right Tools For Time Tracking And Project Management
Technology has come far and if you want your project to keep pace with it you need tech-driven tools for time tracking and management. Doing the estimation and managing the project manually will make your crazy leading to loopholes in cost estimation and budget failure. Tools like Salesforce, Zoho, etc. are a good example to start with and have a view of proper budgeting.
6. Develop A Communication Strategy
Crating the budget for any project is not a one-person task, it needs the involvement of experience. To keep everybody updated with the cost and other plans work on creating a strategy that will guide the stakeholders all through the project. The structure will let them know that what budget has been decided in the middle and what will be the final figure. A project communication plan enables you to communicate effectively on a project with your client, team, and other stakeholders. It sets the norms for how the information will be shared, as well as who’s responsible for and needs to be enrolled.
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7. Include The Hidden Cost
Every project has a section for hidden cost because there are certain aspects which are either too negligible or are left out. This should be handled carefully right from the very beginning of the budget calculations as these costs can hamper or take you into a loss. Keep a note of every minute detail in the project and check that those are included.
8. The Scope Should Be Clear
Changes in the project are ought to happen and these can be handled through a proper change management plan, but the budget affected due to the change needs to be clarified beforehand. Make sure the scope of the project is well signed by the client and it includes the cost of changes if any.
9. Include Time For Testing, Training and Updating
Any budget calculation depends on the efforts of the team who is executing the project. So, including the team’s efforts in testing, providing or gaining pieces of training and if it is software then updating the same is required. A successful and controlled budget is the one that includes all these aspects.
10. Spend a Little On Art
When it comes to IT projects, user interface/user experience is one of the important things to be included in the budget creation. By using concept art or interactive demos customers can have a user-friendly interface and can make your project a big success. Before you start spending a lot of money on engineers, spend a little on artists and designers and include the cost in the plan.
11. Build-in Contingencies
You need to categorize the things outside your control and may impact the defined budget. For example, external environmental considerations that may impact the cost of supplies, resources, labor, financing, product/service shortages, currency exchanges and so on. This is also a fact that the price or rate that is today may not be there tomorrow. Make sure vendors can deliver on their promises and have a backup plan to cope up with the changing conditions. Getting input from other stakeholders and vendors can go a long way to setting a more in-depth and genuine budget, even if the circumstances are hidden.
12. Understand Stakeholder’s True Needs And Wants
Ensure to put in as much time as is required to understand what your clients or stakeholders expect. Once you are clear about everything, including the budget, you can work accordingly on creating the final sheet. So the primary step to an efficiently managed project budget is to certify that project requirements are precisely identified, documented and confirmed with all stakeholders — and that these are conversed to all parties involved. Make sure to execute your project around the defined needs of the stakeholders.
13. Prepare For The Risks
There are chances when the project managers go off the track with escalating costs, managing the suppliers that couldn’t meet quoted obligations or other issues. So, prepare for the worst to come and stay tuned with the updates in the economy sector.
14. Develop Relevant KPIs
A project’s budget depends massively on the properly defined KPIs of the team members. You can’t manage a project budget without establishing key performance indicators (KPIs). KPIs help you to identify how much has been spent and how much will you require shortly. KPI also gives you a glimpse of the extent to which the project’s actual budget differs from what was planned and a lot more.
15. Review And Procrastinate
A project left to course without budget supervision and re-forecasting will lead to disappointment. Frequent budget error is crucial in averting budgets from getting too far out of point. Just as a project’s budget needs to be frequently revisited to retain it on track, so too do the project’s resource usage, since the people functioning on a project contribute to its cost. Project managers should review the number of people currently working on a project and the project’s future resource needs every week. Doing so will confirm that you’re fully consuming the resources you have and that you have the correct resources equipped for the rest of the project. Regularly reexamining the resource forecast will help keep the project budget on right path. Scope sidle is one of the leading origin of project overruns. As unexpected work discovers its way into your project, billable hours pedestal and the project budget can get out of control.
16. Keep Everyone Informed
The project budget must be an informed decision. Anything you review with your team and stakeholders regularly should be a part of your budget. Project managers who carefully watch budgets throughout the project journey their projects will keep stakeholders and management happy and thus lead to success.
17. Anticipate Scope Change
Be ready with a risk management plan and the changes that might occur in any project plan affecting the entire budget. Keep a back-up plan to deal with the situation and leave room for such changes. Be flexible in your approach and you will see the positive effects.
18. Refer to Lessons Learned
Always keep in mind that failures are stepping stones to success. Before creating the final budget for the project remember all your failed budget plans and try not to repeat those mistakes that you made in the failed ones. Review your old issues and find out ways to mitigate them creating an impressive budget.
As the project budget needs to be transparent among the stakeholders, team members and others who are involved hence everyone should be accountable for the same. Remember this is not a game where one wins and the other loses, it’s teamwork and everyone should participate in incorrect estimation to present the final cost to the client. If the budget is accepted it is the win for the entire team and if it is not accepted the whole team stands responsible.
In the end, the final approval from the project lead is required. Mention your structures way stating that how did you get the written figure starting from the scratch. State the examples of your previous projects and also give the reasons for the things not included in the budget calculation, this will enlighten the managers and they may suggest a better way out.
Creating a project budget is not an easy task, the entire yes or a no depends on one bottom line-‘How much is the cost?’ if your competitor proves his/her budget more valid then you might lose the opportunity which will lead to losing your important client. To avoid such situations it is required to prepare any budget plan with a sharp mind and informed efforts. Last but not least do not forget to add any tax or special charges as they may impact a lot. Some projects are indeed hard to budget out as you never know when will a change occur, but what matters the most is how you can deal with these events and bring your organization to profit always. May be your planning and efforts are not worth it when technical projects take a giant leap, such as when any software installation takes more time and effort than expected. Successful project managers are those who deal with such loopholes and bring out the better. Cost of a project can never be set or exact, there are more chances of changes than stability and what is required from you is –Have you left any room for these changes to happen? If ‘yes’ will it affect the cost? And the answer to this question should be positive.
In the end, what matters is how well you manage the project overruns. This is what will make a difference and will contribute to making your project budget controlled.