How to Create a Budget in Ms. Project 2016

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What do you do when you’re starting a new project and don’t know where to start? With Ms. Project 2016, there are plenty of tools at your disposal to help make budgeting easy. You can quickly figure out how much money you need for your project, find templates and resources that will save you time and energy, and even track your progress! All of this information is waiting for you in our helpful guide!

How to Create a Budget in Ms. Project 2016

Creating a Project and Adding Budget Items

The first step is to create a sample project, typically done during the planning phase, to be used as a demonstration. In this example of a budget in Microsoft Project, we have a simple three stage project as seen below.

Next, view the project resource sheet by clicking on “View” and then “Resource Sheet.” As you can see, we have added 8 work resources and 2 cost resources to get started.

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Now, add two budget items: “Budget – Trips” as “Cost” and “Budget – Human Resources” as “Work.”

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After entering each item, open the “Resource Information” dialog for each. Choose the “Resource Type” as cost and then click the “Budget” check box. Click the “OK” button when done.

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The next step in this example of a budget in Microsoft Project assigns the budget items to the “Project Summary.”

The Project Summary

The next part of this example of a budget in Microsoft Project requires you to switch to the “Gantt Chart” view. Once there, click on “Tools” on the main menu and then select “Options.” If the “View” tab is not displayed, select it by clicking on the tab with your mouse.

Check the “Show project summary task” box and then click the “OK” button.

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You now see the example of a budget in Microsoft Project added as the top row.

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Select that project summary task and then click the “Assign Resources” button on the toolbar.

Next, select the two budget resources created earlier in this tutorial and then click the “Assign” button.

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When that is done, click the “Close” button. The budget resources are now assigned to the project. Now it is time to create values for each one. To do this, click “View” and then “Resource Usage.” In this view, the next step is to add budget cost and budget work fields. Click “Insert” on the main menu and then “Column.” In the “Column Definition” drop down box, select the “Budget Cost” field.

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Click OK and then repeat to add the “Budget Work” field. Now you can add budgeted amounts for the “Trips” and “Human Resources” costs.

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Now, you have to choose which resources to track and measure with regards to the budget. We will now create a custom field to accomplish this.

Adding the Budget Type and Viewing Budgetary Performance

As we continue this example of a budget in Microsoft Project, switch back to the “Resource Sheet” view and then click the “Tools” menu and then select “Customize” and then “Fields.” Choose a text field and call it “Budget Type.” In the “Calculation for assignment rows” section, choose “Roll down unless manually entered” option and then click the “OK” button.

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Add the new field to your resource sheet by highlighting the “Material Label” column, clicking the “Insert” option on the main menu, and selecting column. Find the custom field you just created in the drop down list and then click the “OK” button.

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You will now see the “Budget” column appear at the top of your resource sheet. You can define each resource as either a Trips or Human Resources budget item.

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The last step is to group the resources of the project based on the “Budget Type” field. This allows us to compare the project’s budget to the resources assigned to the project. To do this, change to the “Resources View.” Click the “Project” option on the main menu and then “Group by.” You want to select the “Customize Group By” option.

In the “Customize Group By” window, select the custom “Budget Type” field from the drop down box on the “Group By” row. Click the “OK” button.

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Now, go back to the Gantt Chart view and assign resources to each task and assign a progression to each one. This is necessary to see how the budget tracking works.

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Now this example of a budget in Microsoft Project is complete. Click “View” and then “Resource Usage” to see the resources sheet. Here you can compare the budgeted amount for each budget type with the actual usage for each resource.

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As resources do work and take trips, you can easily track and print out a report of how your project is performing based on budgetary considerations.

This Microsoft Project tutorial showed you an example of a budget in Microsoft Project. Because this was a tutorial, your actual project will be different, but will apply the same principles used here.

How to use Microsoft Project for Budgeting.

To best track costs, you should first create a budget (budget: The estimated cost of a project that you establish in Project with your baseline plan.) by creating and entering cost values for budget resources (budget resource: A budget resource captures the maximum capacity for a project to consume money, work, or material units for a project. Budgets can only be applied at the project level by assigning a budget resource to the project summary task.) that are assigned to the project summary task (project summary task: A task that summarizes the duration, work, and costs of all tasks in a project. The project summary task appears at the top of the project, its ID number is 0, and it presents the project’s timeline from start to finish.). You can then identify other resources and task costs that you want to track and measure against the budget resources. You can enter pay rates (pay rate: Resource cost per hour. Project includes two types of pay rates: standard rates and overtime rates.), per-use (per-use cost: A set fee for the use of a resource that can be in place of, or in addition to, a variable. For work resources, a per-use cost accrues each time that the resource is used. For material resources, a per-use cost is accrued only once.) and fixed (fixed cost: A set cost for a task that remains constant regardless of the task duration or the work performed by a resource.) costs for tasks (task: An activity that has a beginning and an end. Project plans are made up of tasks.), resources (resources: The people, equipment, and material that are used to complete tasks in a project.), and, if necessary, assignments (assignment: A specific resource that is assigned to a particular task.). Then, specify the estimated work (work: For tasks, the total labor required to complete a task. For assignments, the amount of work to which a resource is assigned. For resources, the total amount of work to which a resource is assigned for all tasks. Work is different from task duration.) or duration (duration: The total span of active working time that is required to complete a task. This is generally the amount of working time from the start to finish of a task, as defined by the project and resource calendar.) for tasks and assign resources to the tasks.

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Only when all of these steps are complete can Project 2007 calculate the total estimated costs for the project. You might then want to refine your estimates. When you’re done, you can categorize and group all resources to compare them to the budgeted costs. You can also set a baseline with the budgeted costs, and use it to compare with actual costs (actual cost: The cost that has actually been incurred to date for a task, resource, or assignment. For example, if the only resource assigned to a task gets paid $20 per hour and has worked for two hours, the actual cost to date for the task is $40.) as your project progresses.

After the project starts, you update task progress — the amount of work done on tasks or the percentage of the tasks that are complete. Project 2007 calculates costs for you based on task progress.

 Note   You can also choose to turn off automatic calculation of costs and enter actual costs yourself, in addition to task progress.

By combining the actual costs of completed work with the estimated costs for remaining work (remaining work: The amount of work, in terms of a time unit such as hours or days, that is left to be completed on a task. This is calculated as follows: Remaining Work = Work – Actual Work.), Project 2007 calculates scheduled (scheduled or current cost: The latest cost of tasks, resources, assignments, and the entire project, which is displayed in the cost field as cost or total cost. It is kept up to date with cost adjustments that you make and with the project’s progress.) (projected) costs. More importantly, it calculates the difference between the scheduled and baseline costs. This difference, or cost variance (CV: The difference between the budgeted cost of work performed [BCWP] on a task and the actual cost of work performed [ACWP]. If the CV is positive, the cost is currently under the budgeted amount; if the CV is negative, the task is currently over budget.), tells you whether your project is on budget.

You can do simple cost tracking by viewing the actual and scheduled (projected) costs for tasks, resources, assignments, and the project.

If you’ve created a budget through a baseline, you can do more extensive tracking by comparing the actual and scheduled costs against the baseline costs.

To determine whether you’re on budget or not, you can view the cost variances between scheduled costs and baseline costs. For example, if a task is budgeted to cost $50, but the task is half-way done and already costs $35, the scheduled cost is $60 (the $35 actual costs to date, plus the $25 expected costs for the remaining work on the task). The cost variance is $10 ($60 of actual cost minus the $50 of budget cost).

By monitoring cost variances regularly, you can take steps to make sure that your project stays close to its budget.

 Note   You can only view cost variances if you’ve entered initial costs and saved a baseline. For instance, if you didn’t enter pay rates for a resource before you saved the baseline, you won’t be able to view cost variances for that resource.

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what are the different types of costs in Microsoft Project

Direct cost

Direct costs are those directly linked to doing the work of the project. For example, this could include hiring specialised contractors, buying software licences or commissioning your new building.

Indirect cost

These costs are not specifically linked to your project but are the cost of doing business overall. Examples are heating, lighting, office space rental (unless your project gets its own offices hired specially), stocking the communal coffee machine and so on.

Fixed cost

Fixed costs are everything that is a one-off charge. These fees are not linked to how long your project goes on for. So if you need to pay for one-time advertising to secure a specialist software engineer, or you are paying for a day of Agile consultancy to help you start the project up the best way, those are fixed costs.

Variable cost

These are the opposite of fixed costs – charges that change with the length of your project. It’s more expensive to pay staff salaries over a 12 month project than a 6 month one. Machine hire over 8 weeks is more than for 3 weeks. You get the picture.

Sunk cost

These are costs that have already been incurred. They could be made up of any of the types of cost above but the point is that they have happened. The money has gone. These costs are often forgotten in business cases, but they are essential to know about. Having said that, stop/continue decisions are often (wrongly) based on sunk costs. If you have spent £1m, spending another £200k to deliver something that the company doesn’t want is just wasting another £200k. Epstein and Maltzman write:

“Sunk cost is a loss which should not play any part in determining the future of the project.” Unfortunately, project sponsors and other senior executives (and even project managers) often value completion over usefulness and it does take courage to suggest to your sponsor that you stop a project that has already seen significant investment.

What other examples of these types of costs do you have on your projects? And have you ever taken the hit and stopped a project after incurring significant cost? Let us know in the comments.

The Budget Cost fields are used to enter or review budget costs for budget cost resources. Budget resources are assigned only to the project summary task. You can use the Budget Cost fields to compare the current budgeted costs with the planned or actual costs for the project.

There are several categories of Budget Cost fields.

Budget Cost (task field)

Data Type    Currency

Entry Type     Calculated

How Calculated    When you assign a cost resource that is a budget resource to a project summary task, and then enter a budget amount for the cost resource in either the Task Usage or Resource Usage view, Microsoft Project rolls up the total amount to the project summary task.

This information can then be used to review the overall budget cost information for the project. If the project is part of a master project or portfolio of projects, the project summary budget cost information can be compared and analyzed against other projects. The project summary task of the master project includes the value of its own budget resources plus the sum of the budget resources of its inserted projects.

Best Uses    Add the Budget Cost field to a task view and show the project summary task when you want to review the total budget for cost resources. After you start tracking progress in your project plan, you can use the Budget Cost field to compare your budgeted costs against your actual costs.

Example    With a budget of $15,000 for travel for a three-month project, you have identified “Travel” as a cost resource and a budget resource. You’ve assigned this cost resource to the project summary task, and entered the budget amount for travel in the Task Usage view. As work on the project continues, you enter actual progress information in the project plan. You compare any variances between your planned costs and actual costs to ensure that you’re on track and to make any necessary adjustments.

Remarks    You can only enter information in the Budget Cost field for cost resources that are budget resources. (For work and material resources that are budget resources, you can enter information in the Budget Work fields.)

Budget Cost (resource field)

Data Type    Currency

Entry Type     Calculated

How Calculated    When you assign a cost resource that is a budget resource to a project summary task, and then enter a budget amount for the cost resource in either the Task Usage or Resource Usage view, Project copies that budget amount to the Budget Cost resource field.

Best Uses    Add the Budget Cost field to a resource view when you want to review the budget for cost resources, or to compare the budgets of cost resources to each other.

Example    With a budget of $15,000 for travel for a three-month project, you have identified “Travel” as a cost resource and a budget resource. You’ve assigned this cost resource to the project summary task, and entered the budget amount for travel in the Task Usage view. When you add the Budget Cost field to the resource sheet, you see that the “Travel” cost resource reflects this budget of $15,000.

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Remarks    You can only enter information in the Budget Cost field for cost resources that are budget resources. (For work and material resources that are budget resources, you can enter information in the Budget Work fields.)

Budget Cost (assignment field)

Data Type    Currency

Entry Type     Entered

Best Uses    Add the Budget Cost field to the Task Usage or Resource Usage view when you want to enter the budget amount for cost resources on assignments, or when you want to compare the budgets of cost resources to one another.

Example    With a budget of $15,000 for travel for a three-month project, you have identified “Travel” as a cost resource and a budget resource. You’ve assigned this cost resource to the project summary task. You can now enter the lump-sum budget amount for travel in the sheet portion of the Task Usage view.

Remarks    You can only enter information in the Budget Cost field for cost resources that are budget resources. (For work and material resources that are budget resources, you can enter information in the Budget Work fields.)

Budget Cost (task-timephased field)

Data Type    Currency

Entry Type     Calculated

How Calculated    When you assign a cost resource that is a budget resource to a project summary task, and then enter a budget amount for the cost resource in either the Task Usage or Resource Usage view, Project rolls down the total amount to the task-timephased level.

Best Uses    You can show the Budget Cost field in the timesheet portion of the Task Usage view by adding it in the Detail Styles dialog box. This shows the budget cost for the task and assignment(s) spread out over time.

After you start tracking progress in your project plan, you can use the Budget Cost field to compare your budgeted costs against your actual costs.

Example    With a budget of $15,000 for travel for a three-month project, you have identified “Travel” as a cost resource and a budget resource. You’ve assigned this cost resource to the project summary task, and entered the budget amount for travel on the assignment in the Task Usage view. As work on the project continues, you enter actual progress information in the project plan. You compare any variances between your planned timephased costs and actual timephased costs to ensure that you’re on track and to make any necessary adjustments.

Remarks    You can only enter information in the Budget Cost field for cost resources that are budget resources. (For work and material resources that are budget resources, you can enter information in the Budget Work fields.)

Budget Cost (resource-timephased field)

Data Type    Currency

Entry Type     Calculated

How Calculated    When you assign a cost resource that is a budget resource to a project summary task, and then enter a budget amount for the cost resource in either the Task Usage or Resource Usage view, Project rolls down the total amount to the resource-timephased level.

Best Uses    You can show the Budget Cost field in the timesheet portion of the Resource Usage view by adding it in the Detail Styles dialog box. This shows the budget cost for the resource and assignment(s) spread out over time.

Example    With a budget of $15,000 for travel for a three-month project, you have identified “Travel” as a cost resource and a budget resource. You’ve assigned this cost resource to the project summary task, and entered the budget amount for travel on the assignment in the Resource Usage view. As work on the project continues, you enter actual progress information in the project plan. You compare any variances between your planned timephased costs and actual timephased costs to ensure that you’re on track and to make any necessary adjustments.

Remarks    You can only enter information in the Budget Cost field for cost resources that are budget resources. (For work and material resources that are budget resources, you can enter information in the Budget Work fields.)

Budget Cost (assignment-timephased field)

Data Type    Currency

Entry Type    Entered

Best Uses    You can show the Budget Cost field in the timesheet portion of the Task Usage or Resource Usage view by adding it in the Detail Styles dialog box. You can now enter or review the budget cost for the assignment spread out over time.

Example    With a budget of $15,000 for travel for a three-month project, you have identified “Travel” as a cost resource and a budget resource. You’ve assigned this cost resource to the project summary task. You can now enter timephased or contoured budget amount for travel in the timesheet portion of the Task Usage or Resource Usage view.

Conclusion

Making a budget for your Ms. Project 2016 project is acritical step in ensuring success. By taking into account all of the important factors, such as how much money you will need to spend and what needs to be done in order to meet budget goals, you can create a safe and effective plan. By following these tips, you can make budgeting a fun and stress-free process.

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