How to Create a Budget Plan for a Project
A project budget is an estimate of the costs of each phase of a project. It’s like a road map that shows how you’ll get from point A to point B, and it helps you stay on track. We all know that if you don’t have the funds, you’re not going to complete the project successfully. That’s why a project budget is so important: it’s the lifeblood of the project. Follow these steps to secure the funds necessary to support the project through every phase.
How to Create a Budget Plan for a Project
What Is a Project Budget?
A project budget is the total projected costs needed to complete a project over a defined period of time. It’s used to estimate what the costs of the project will be for every phase of the project. Creating a project budget is a critical part of the project planning process.
The project budget will include such things as labor costs, material procurement costs and operating costs. But it’s not a static document. Your project budget will be reviewed and revived throughout the project, hopefully with the help of project budgeting software.
Why You Need a Project Budget
The obvious answer is that projects cost money, but it’s more nuanced than that. The project budget is the engine that drives your project’s funding. It communicates to stakeholders how much money is needed and when it’s needed. Project budgets are important for any industry such as construction, marketing or manufacturing, for example.
But a project budget is not only a means to get things that your project requires. Yes, you need to pay teams, buy or rent equipment and materials, but that’s only half the story.
The other part of the importance of a project budget is that it’s an instrument to control project costs. The budget, which is part of your project plan, acts as a baseline to measure your performance as you collect the actual costs once the project has been started.
Creating a Project Budget
As noted above, there are many components necessary to build a budget, including direct and indirect costs, fixed and variable costs, labor and materials, travel, equipment and space, licenses and whatever else may impact your project expenses.
To meet all the financial needs of your project, a project budget must be created thoroughly, not missing any aspect that requires funding. To do this, we’ve outlined seven essential steps toward creating and managing your project budget:
1. Use Historical Data
Your project is likely not the first to try and accomplish a specific objective or goal. Looking back at similar projects and their budgets is a great way to get a headstart on building your budget.
2. Reference Lessons Learned
To further elaborate on historical data, you can learn from their successes and mistakes. It provides a clear path that leads to more accurate estimates. You can even learn about how they responded to changes and kept their budget under control. Here’s a lessons learned template if you need to start tracking those findings in your organization.
3. Leverage Your Experts
Another resource to build a project budget is to tap those who have experience and knowledge—be they mentors, other project managers or experts in the field. Reaching out to those who have created budgets can help you stay on track and avoid unnecessary pitfalls.
4. Confirm Accuracy
Once you have your budget, you’re not done. You want to take a look at it and make sure your figures are accurate. During the project is not the time to find a typo. You can also seek those experts and other project team members to check the budget and make sure it’s right.
5. Baseline and Re-Baseline the Budget
Your project budget is the baseline by which you’ll measure your project’s progress once it has started. It is a tool to gauge the variance of the project. But, as stated above, you’ll want to re-baseline as changes occur in your project. Once the change control board approves any change you need to re-baseline.
Project management software makes setting a baseline simple. Take ProjectManager, all you have to do is open up the settings on your Gantt and select set a baseline. Now you have the planned effort saved and you can compare it to your actual effort as you execute the project. You can reset the baseline as many times as you need during the project to always be able to measure your project variance instantly. Try our tool for free today.
6. Update in Real Time
Speaking of changes, the sooner you know about them, the better. If your project planning software isn’t cloud-based and updating as soon as your team changes its status, then you’re wasting valuable and expensive time.
7. Get on Track
The importance of having a project management software that tracks in real time, like ProjectManager, is that it gives you the information you need to get back on track sooner rather than later. Things change and projects go off track all the time. It’s the projects that get back on track faster that are successful.
If you manage your project expenses using these building blocks you’re going to have a sound foundation for your project’s success.
Project Budget Example
To further illustrate how a project budget is created, let’s pretend we’re making an app. The first thing you’ll need to figure out is the costs for labor and materials. You’ll need programmers, designers, content developers a dev team, etc. It helps list all the tasks and assign the team to them—a hallmark of good task management. This way every penny is accounted for.
With the tasks broken down for the project and your team in place, you’ll next need to look into whatever materials will be needed. Will they need laptops, other devices and equipment? This must be accounted for.
Now note other line items. There might be travel expenses and renting space to house the team. Then there are fixed items that are true for any project. These are things where the cost is set and will not change over the course of the project. You’ll also want a column for any miscellaneous costs that don’t fit elsewhere in the budget.
Your budget must have a planned versus actual column. When you’re making that app you’ve likely to pivot and that is going to impact the budget. These columns are a way to track the expenditure to make sure you’re staying on budget.
Budgeting Techniques Used in Project Management
Project management budgeting is the action of determining the total funds that are allocated for a specific project. The budget is usually estimated by the project manager along with the project management team and consists of all the projected costs for the upcoming project. The main challenge in creating a realistic budget is understanding and correctly estimating individual costs for all the elements that go into the project.
Some of the things that need to be determined when calculating a project’s budget are:
- How the project’s costs would be continuously tracked until its completion
- How the costs are spread out across multiple project phases and milestones
- What tools would be used to store and report cost data
- What the plan is for situations in which the project is either under or over budget
- How the project’s budget fits into the parent organization’s overall strategy
Given below are some of the most noteworthy project management techniques that are commonly used in the industry right now.
1. Analogous estimating
This method of estimating a budget consists of analyzing an already completed project with a similar scope to the current one and using its budgeting calculations, adjusted for differences in scope, quality, term of execution or any other relevant parameters. It is not always a completely accurate method, but it can be an appropriate method in situations when there is limited information regarding the upcoming project and a quick estimate is required. This method is usually quicker and less costly than others, but can only be used by companies that have had similar projects in the past.
2. Parametric estimating
This estimating method consists of using historical data and other related variables for estimating the project’s scope, duration and total costs. This is usually achieved by researching past data, calculating various per-unit costs for various aspects that are common to the current project and adjusting the proportions to fit the scope of the new project. The accuracy of this method is usually proportional to the quality and relevancy of the historical data it is based on.
3. Top-down method
This method consists of looking at the project budget in its entirety and then calculating individual costs for each of the required processes. Each part of the overall project is analyzed, with its exact costs calculated and then compared to the initial estimates for each. Based on the results, project managers can see how cost-efficient each process is and may decide to reduce the scope of some parts of the project, so it fits within its total allocated budget.
4. Bottom-up method
Unlike the top-down method, which divides the project into multiple processes and calculates the individual costs for each, by using the bottom-up method the project manager attempts to directly generate a total project budget, with the help of their project management team. As a general rule for this method, the budget estimation’s accuracy is usually proportional to the accuracy of the information and expert advice received during the budgeting period.
5. Three-point estimate
This method uses three different calculations to estimate a budget: the most expensive scenario, the most cost-effective scenario and the scenario that’s most likely to occur. By using these figures you can roughly estimate there required budget, but also assess some of the risks involved in the project.
6. Earned value analysis
This method is a way of estimating the accuracy of a project’s budget during the execution of the project. It consists of constantly comparing the costs for each phase of the project with the ones that were previously estimated, typically by using one of the four previously-mentioned methods.
Tips for accurate project management budgeting
Consider these tips when determining a project’s budget:
- Focus on the organization’s needs. When creating a budget for a particular project, it is essential to remember that the ultimate goal of any project is to help its parent organization reach its goals. By knowing exactly how valuable a project is to the organization you can improve your odds of accurately determining its budget.
- Keep open communication with the stakeholders. Throughout the project’s budgeting and execution phases, you must constantly communicate with the people who stand to benefit from its successful completion. Depending on their priorities and needs, you can determine if the project is correctly budgeted or if it needs adjustments in scope and budget.
- Adapt to changing parameters. Various unforeseen events and situations may occur from the time a project is budgeted until its execution. When creating a budget, you need to plan for this eventuality and have enough flexibility to adapt to any change, internal or external.
Project management tools and techniques
Project management tools and techniques that really work; that’s the problem statement. We live in a world where we are bombarded with different scenarios and projects in our daily work life. Eventually, these variables affect us to the extent that productivity suffers at multiple levels. We simply can’t wrap our heads around such complexities, even if we have a proper strategy or a leader with an effective mindset that can help us get through that ordeal.
These strategies and tools are properly necessary so that we can get the job done without spending more and more of our revenue and manpower, because if we spend that much energy on work activities without a proper direction in mind then we are in for serious trouble down the road.
In this brief article, we will help you study some effective tools and techniques which can be used in different fields of the organizational culture that facilitate you in creating an efficient strategy and successfully delivering a top-notch project.
When it comes to project management tools and techniques, you don’t have just one technique or foolproof tool that you can use in every project of every organization. Your decision about which one to choose should arise from the project specifics that the brief contained, the complexity level that the project boasts, the nature and qualification of the team involved in the development, and countless other factors.
Most of the project management tools and techniques can be used in various fields, but there are techniques that are natively designed for specific activities and these activities or projects really can’t function properly if they don’t have the foundation of those tools.
Given below are some of the most noteworthy project management techniques that are commonly used in the industry right now.
1. Classic technique
We often think that completing a project or an assignment in our work-life requires the latest and the most complex tools and techniques so that we can achieve tangible results and for the most part is true but for all those other times the traditional and simplest techniques are the most appropriate for effective development in projects.
The classical technique in project management is an amazing procedure that includes a proper plan to cover all of the upcoming work activities, which tasks are to be performed, and what should be the chain of application that defines which task to do first, allocating proper resources to the tasks according to their importance, providing and receiving proper feedback from the team which helps in team building and also monitoring the quality of the work done and how are the deadlines being met by the team.
nTask has incorporated this technique in the app where you can create simple tasks for your teams and set actual and planned deadlines. You can also prioritize the tasks based on their urgency or dependencies.
Where to use: The Classical procedure is amazing for running projects that are performed by a team that is small in number because a larger team with a complex strategy isn’t required.
2. Waterfall technique
The waterfall technique is also considered a traditional project management tool because it builds on the upper mentioned Classical approach and takes it to a whole new level.
As the title suggests, the Waterfall technique is based on your project management tasks to be dealt with in a properly sequential form where the next task is only performed and performed well when the previous task has been completed. Just like a waterfall, the tasks flow to the desired direction smoothly but only if they are completed in a sequential form.
If you are working on a complex project with a lot of dependencies you can easily tackle the management of such kind of project using Gantt charts of nTask.
The projects are very properly monitored while using this technique and all the steps are accountable and are actually evaluated to confirm that the process is seamless and without any issues or worries. Gant charts are also used to clearly display a visual representation of all of the phases that the tasks go through and all of the dependencies involved in the project.
Where to use: The waterfall technique is an amazing technique that is used for complex projects that can not be dealt with by the classical approach. This is because of the fact that phasing is required in the development and if you really want to deliver a successful project then a properly rigid work structuring is required.
3. Agile Project Management
The project management technique that is the most famous and is quite outstanding in its application because it deals with projects in a way quite different from other traditional procedures is the Agile Project Management technique.
The Agile approach is basically crushing the big project steps into shorter sprints that help in a detailed analysis of the whole process during the development stage. This detailed analysis helps in effective and adaptive planning according to the needs and changes required in the project as it gains a proper shape.
All of these activities result in a solid continual improvement during the developmental stage, and also the teams become more organized and collaborative inclined to produce the best results possible.
The Agile frameworks commonly include different techniques such as Scrum, Kanban, FDD, and DSDM, etc.
Where to use: The Agile project management technique is used in projects whose development unravels in short but precise increments performed by small but highly collaborative teams.
As the Agile management procedure is so famous that, today, there are a lot of projects and work management software tools that will help you embed Scrum and Agile into your project and help you complete the development process with ease.
With Apps like nTask, you can configure different levels of your work structure which is quite convenient in tough situations, and also track long and short-term deadlines to keep your team on track. They can also show you the estimated work strategy for a specific project during the planning process and even create a Kanban board that effectively monitors all of the work progress your team has made so far.
Basically, what these software tools do is that allow you to envision your project being performed by the Agile method and visualize the structure so that you can achieve good results.
4. Rational Unified Process (RUP)
RUP is an amazing framework that was specially designed for the software market where the software development teams and the projects they work on, can benefit from this framework and achieve the best results possible.
Rational Unified Process prescribes implementing a sequential or iterative developmental process like the Waterfall technique, but with a slight change as the feedback which is collected for the betterment of the project in all future iterations and modifications, is taken from the direct product users.
Where to use: The RUP procedure is applied to software development projects where the whole process is broken down into pieces and also where the end-user input and satisfaction is a key factors of the project.
5. Program Evaluation and Review Technique
Program Evaluation and Review Technique (PERT) is an incredible software management technique that is very widely used in a lot of different areas and industries. The way this technique works is that it facilitates the project with quite complex and amazingly detailed planned scenarios that help the development team to properly visualize the whole process and their end results on PERT charts.
The main feature that this technique has is that it performs an effective analysis of the tasks that are performed within the project. That helps the team to keep track of all of their developmental activities and fix their weaknesses.
This technique was originally designed by the US Navy during the Cold War era which helped them to increase the efficiency of the work activities that were being performed in developing new technologies.
Where to use: Program Evaluation and Review Technique is best suited for those large and long-term projects where there a lot of non-routine tasks with ever-changing stakes. Also, the requirements for these projects can change according to the circumstances or a number of factors but PERT can handle them just fine.
6. Critical Path Technique
The Critical Path Technique is an amazing procedure that is used for projects and different tasks to schedule and plan the work activities, according to the requirements mentioned in the project brief. This technique is also in conjunction with the Program Evaluation and Review Technique method mentioned above.
This is an incredible technique that is used to detect and confirm the longest path for the tasks to be performed. This means that the activities that are supposed to happen on a certain trajectory have their critical importance highlighted so that the tasks can be individually performed and not in a sequential form.
This critical importance that technique finds out is helpful because then the development teams can control the project by playing head-on and complete the critical tasks first. This saves them precious time and they can complete the project with relative ease, once the more important work is out of the way.
Where to use: Critical Path Technique is more commonly used for very complex projects that have a lot of different tasks. And the development team has no idea what to complete first so that they can meet the deadlines and complete the project in a good time without wasting precious time and energy on doing everything at once, which generally results in them completing nothing. This procedure is generally used in areas like construction, software development, defense, and others.
7. Critical Chain Technique
Critical Chain Technique is an incredible derivation from the PERT and Critical Path Methodologies of project management. It has a more relaxed approach in terms of task orders and scheduling and suggests that there should be more flexibility while allocating resourcing to different tasks and more attention to analyze how the work time is being spent by the team on different project activities.
The CCT suggests that the work should be done on the basis of prioritization and also the dependencies relative to the project should be analyzed properly while the time spent on different activities should be optimized more carefully.
Where to use: Like the Program Evaluation and Review Technique and The Critical Path Technique, the Critical chain Technique is used in very complex projects. As it shines a more prominent light on how the team spends their time and revenue, it is best suited for projects where the resources are limited.
8. Extreme Project Management (XPM)
Extreme Project Management technique has a more loose and optimistic approach when it comes to planning a project. It insists that the approach should be open and there should be a reduction of formalism in the company’s culture and the behavior of the management should not be stern and deterministic.
Where to use: XPM technique is commonly used in large projects where the complexity and uncertainty are high. This is because there are a large number of uncertain and unpredictable factors involved in the project that need to be addressed.
9. Kanban System
The Kanban System is the Agile methodology approach that helps to visualize the project management workflows from “Start” to “Done” status columns. It gives you the ability to map the workflow and put a limit to work in progress. Many people use notebooks, or display boards on the wall to move the cards along the work stages, but there are many useful Kanban Tools that can do this job more efficiently.
While using this technique of project management, you have full freedom to customize the name of the work stages that best fit your use case. Project management tools like nTask offer pre-built Kanban Board Templates that are easy to get started from users across any industry.
Another benefit of this methodology is that there is no need to have a scrum master to manage the work assigned, the whole project team is responsible to make timely deliveries.
Where to use: Kanban can be used for any project from small gigs to personal task lists, consultant bookings, to even large-scale software development projects. It is more useful to implement in any organization that has the less technical staff, so it is easy to adapt.
Project Management Tools
While the techniques are important, you also need specific tools that you can use to properly implement during the development page and achieve your desired results. Here is a list of tools that you can use during project management.
1. Organizing Workflow & Planning
The most important part and the literal start of any project is the planning stage which is basically the core of the whole process. This step defines who a project will be performed and how will it take shape so that the desired quality can be ensured and achieved in the future.
Large companies tend to use comprehensive solutions like MS Project that are designed for larger teams. For smaller teams though, it’s a different story. There are a lot of different alternatives on the market which you can equip yourself with that don’t have all of the fancy features of those comprehensive solutions, but they still get the job done with their planning and roadmap features, useful for visualizing future project progress.
As it is a major factor in almost all of the techniques and methodologies in not just the project management context but also in other fields of the market, communication within a project team needs to be frequent and effective. You can use emails for all of the formal stuff, but you can also use applications like Skype and Slack for impromptu conversations among team members which will increase team collaboration resulting in positive growth in productivity.
3. Scheduling and Time Management
Money is the top factor in the development of a project or anything really. And while in certain projects you are allowed to spend more resources and time quite thoughtlessly, you have to be careful in the other projects where you spend the revenue.
This is because of the limited resources and time, that the project has from the start and also because you should not spend valuable resources on teams and equipment that might not even be available when you are envisioning the work to be done. So, you should always schedule ahead and clarify/ confirm the dates with all of the team members before spending all of the revenue on an empty room full of resources but no manpower.
nTask provides you with a scheduler and a time management tool that can keep track of time spent on specific tasks by the individual team members and all of the relevant time stamps inputted by the staff, so you can schedule accordingly. Utilizing these project management tools and techniques can be a lifesaver.
Project Management is a critical skill for any business. By taking the time to understand what type of project it is, establish a timeline, and control the project process, you can ensure a successful outcome. Thanks to project management tools, you can get the job done on time and within budget.