What is Project Budget Management?
The Project Management Institute describes the nature of project management as temporary, unique and goal oriented. To apply this, one of the important factors that dominates project budget management. Projects managers often face the uncertainty of outcome. At times, it is difficult to know the length of time to complete the project or the outcome of the project. Either ways, this affects the project budget management. For example: The building of Sydney Opera House, which is now an iconic building took 10 more years and 102$ million dollars, 15 times more than estimated cost. Without a proper budget, the project can go wrong, misled and overspent affecting the profit.
Essentials of the Project Budget Management
- Budgeting is essential part of any business in all organisations including project based organisation and project oriented organisation.
- The project manager must consider the scope of the project and project life cycle while planning on budget.
- Strategic Project Management overrules the fact of meeting projects in time and within budget, and considers the outcome, the result, of the project for good business. SPM can influence the way budgets are forecasted in PM.
- Projectmanagementguru.com, have discussed the various tools and techniques which can be used towards the project planning. These tools and techniques helps to formulate the budget template.
- The Stakeholders in the business act upon the budget to keep a track on the progress of the project. For example: The project personnel uses as a guideline to fulfil certain milestone of the project while the client uses to determine the success of effort.
What is included in Budget?
Budgets can be fixed or flexible. The project budget is designed by the people involved in the management of the project. Two important costs usually forms the attributes of budget template. Direct costs and Indirect Costs.
- Direct Costs: Direct costs are the costs that can be directly linked towards the project. For example: staff wages / salaries working on the project, the commissions or bonuses, the software cost or licensee fees for the project, the materials required for running of the project, travelling expenses for the project.
- Indirect Costs: Costs which form the part of the project, but not directly linked are indirect costs. For example: the rent being paid for the premises / office being used (the space can be used to run other projects), insurance of the building, telephone bills, legal fees, marketing and promotion costs, repairs and maintenance costs.
Approach for creating a Project Budget Template
Depending on the project, the previous project results, the desired outcome for the current project, project managers will apply their approach towards designing the template. Project Budget will much fall in line of project planning tools. For example:
The Analogous Estimating uses the history and data from the previous project to forecast the current project.
The Bottom-Up Analysis takes finer details by breaking the project into work breakdown structure (WBS). The WBS helps to budget every unit and takes every part of direct and indirect cost.
Benefits of Project Budget Management
- With a template in hand, project managers can manipulate the cost for better result and prioritize the specific area with higher or lower budget.
- Project Managers can work on the budget and helps to control the costs. With detailed breakdown, the Manager can keep a track of the cost and calculate the excess cost.
- The Project template is an efficient way of measuring the success of the project. It helps to define and develop the project.
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