The project schedule is a key part of project management. As such, a project starts during the development of a project schedule and the activities begin right after the schedule is done. During the initial stages of planning, budgeting is among the most important tasks associated with this stage. Budget depends on a task’s length of completion and the resources that are assigned to it.
The project budget consists of a detailed estimate of all the expenses and costs needed to complete the project tasks.
Oftentimes, budgetary estimates depend on the availability of funds. However, these estimates may not coincide with the actual funds required to complete the project. Just like any other plan, a budget is refined as the project progresses. It is considered as a means of cost control done by comparing the actual expenses with the estimated budget.
Steps in Creating a Project Budget
In creating a comprehensive project budget, the following steps are followed:
- Identify the applicable cost factors associated with the tasks. In gathering budget estimates of each project task, obtain them from the people responsible in managing the corresponding task. They have the expertise required to provide the best estimate and they are the ones accountable during the actual performance of the tasks.
- Create a cost model such as a cost estimation system that is encoded on a spreadsheet. Depending on the complexity of a project, a spreadsheet will do for small and medium scoped projects but a project management software with cost estimation feature will be more useful to projects with larger scope.
- The Work Breakdown Structure (WBS) is the basis for any project budget or cost estimates. The WBS consists of all the tasks necessary in creating the completed product. It decomposes the processes required to produce the defined deliverables.
- Analyze the risks involved and quantify them. One of the best budgeting practices is to make allowances for the risks that might occur during the project duration.
- In the development of the project schedule, remember to document the assumptions while developing the project budget. This is a critical to a project’s success. The purpose is to justify the estimates so that tracking the budget will not be difficult and risky as it is supported by clear documentation.
A project budget is an estimate and needs to be constantly reviewed and refined as the project processes go on. Once a draft budget is completed, discuss it with the team and determine their comments and suggestions as to the work description, schedule and budgets to create a more complete and accurate estimate. Depending on the team’s common understanding of the work tasks, schedule, costs, and the reasons to justify some changes, refine the work packages when there are significant differences or reiterate the estimates if there aren’t.
Sometimes, project managers provide high-level estimates also known as ‘target budgets’ as the project starts. However, this is not the comprehensive project budget. This type of budget can only be achieved in alignment with a project schedule and resource plan. It is important that you can identify all the work tasks of the project and the resources needed to complete the tasks effectively. Only then can you acquire a more accurate and comprehensive project budget.