The Project Management Institute describes the nature of project management as temporary, unique and goal-oriented. One of the essential factors that dominate project budget management is applying this. Projects managers often face the uncertainty of outcome. At times, it isn’t easy to know the length of time to complete the project or the outcome. Either way, this affects the project budget management. For example, the building of Sydney Opera House, which is now an iconic building, took ten more years and 102$ million dollars, 15 times more than the 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 an essential part of any business in all organisations, including project-based organisations and project-oriented organisations.
- The project manager must consider the project’s scope and life cycle while planning on a 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 we forecast budgets in PM.
- Projectmanagementguru.com has discussed the various tools and techniques used in project planning. These tools and techniques help to formulate the budget template.
- The Stakeholders act upon the budget to keep track of the project’s progress. For example, The project personnel uses it as a guideline to fulfil certain project milestones, while the client uses it to determine the effort’s success.
What To Include in the Budget?
You can have fixed or flexible budgets. The project budget’s designed by the people involved in the management of the project. Two significant costs usually form the attributes of a budget template: direct costs and Indirect Costs.
- Direct Costs: Direct costs are the costs that can be directly linked to the project, such as staff wages/salaries working on the project, the commissions or bonuses, the software cost or licensee fees for the project, and the materials required for running the project, and travelling expenses.
- Indirect Costs: Costs that form the part of the project but are 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), building insurance, telephone bills, legal fees, marketing and promotion costs, and repairs and maintenance costs.
Approach for Creating a Project Budget Template
Depending on the project, the previous project results, and the desired outcome for the current project, project managers will apply their approach to designing the template. The project budget will much fall in the line of project planning tools. For example:
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 a work breakdown structure (WBS). The WBS helps budget every unit and takes every part of direct and indirect costs.
Benefits of Project Budget Management
- Project managers can manipulate the cost for better results and prioritise the specific area with a higher or lower budget with a template in hand.
- Project Managers can work on the budget and helps to control the costs. The Manager can track the price and calculate the excess charge with a detailed breakdown.
- The Project template is an efficient way of measuring the project’s success. It helps to define and develop the project.
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