Setting up a project management budget is essential for any business. By knowing how much money you’ll need to allocate for different aspects of your project, you can make better decisions about where to put your resources and what type of funding sources are best suited for your project. This knowledge will help you manage your budget more efficiently and stay on track with deadlines. Below are some important project management questions
Project Management Budget Questions
- Are the initial project budget and timelines available? The initial budget and high-level schedule used to justify the project establish the organization’s expectations for the overall project. These are needed to help explain the variances between the initial estimates and the detailed project schedule and budget that are developed.
- Is the Project Management Plan agreed to? Project staff are intimately familiar with the plan and know how the project will be executed, monitored, and controlled. They and the end-user staff understand the goals and objectives of the overall project and the expected benefits to be derived. They agree to abide by the constraints which govern the execution, the assumptions upon which the plan is predicated, and the rules of engagement.
- Is there a Scope Management Plan in place? Project staff understand how the project scope will be defined, developed, monitored, controlled, and validated. They and end-user staff understand how the overall project scope will be elaborated; how business, process, and technical requirements will be defined; and how changes will be requested, approved, and implemented.
- Is the Schedule Management Plan in place? Project team members understand and have agreed to the policies, procedures, and documentation of all project scheduling activities. The scheduling methodology and tools are in place. Status reporting, progress reporting, variance thresholds, and performance measurement processes are defined.
- Is the Resource Management Plan in place? The Project Manager knows and understands how to acquire and manage resources required for the project – including team members, end-users, supplies, materials, equipment, services, facilities, and other such resource needs.
- Is there a Risk Management Plan in Place? Project stakeholders and the project management staff have defined how risk management will be conducted for the project. Project risk categories are defined, and sources of risk are considered. Roles and responsibilities for mitigating project risks are understood. Risk probabilities and impact levels are documented. The protocol for tapping funding reserves are in place.
- Have project stakeholders all been identified and are they on board? Project stakeholders from both IT and the client are identified by name, role, and required contribution to the project governance and ongoing execution. The stakeholders are in concert with the project team and each other regarding the project goals and objectives.
- Are the system requirements developed to the requisite detail? End-users have defined their business, functional, and usability requirements. IT staff have defined the technical requirements and standards. Project management staff have defined processes for execution of the project and its governance. The requirements are well documented.
- Has the scope been completely defined? Project staff know what will be included in the final implemented system and what specifically will not be included. Areas that are not able to be fully defined are described to the extent that information is available.
- Is the Work Breakdown Structure (WBS) complete? Activities and tasks are decomposed to their lowest levels. The work packages to be delivered are defined and the aggregate of the work packages describe the complete end product.
- Has the project schedule been developed at the appropriate level? The specific project activities required to deliver the WBS work packages have been defined. The relationships among them have been documented. The activities have been sequenced according to how they will be executed.
- Have the project activity durations been estimated? Based on the activities defined to implement the WBS work packages, the durations of each activity have been estimated. The activity sequencing has resulted in the critical path for project execution. The basis for the estimates has been documented.
- Have quality standards for the project and its deliverables been identified? Project processes are established to effectively manage project quality. Processes are in place to help ensure that work products meet the stated requirements. Quality metrics are defined, and processes are established to measure results.
- Have the required resources been estimated? The various types of resources have been defined and quantified. Resource requirements have been estimated for each activity and aggregated for the entire project.
- Have contingency and management reserves been estimated? Based on the amount of uncertainty determined for the project, appropriate contingency reserves and management reserves have been established for the project.
- Is the estimating methodology reliable and acceptable? The estimating methodology is an industry standard methodology and is in broad use within the organization. It is readily understood by the staff deriving the project estimates. If more than one estimating method is used by the organization, the most appropriate one has been selected for this project.
- Have specific individuals been identified for the project? Individuals known to the project management team and their skill levels have been factored into the project estimates.
- Are the latest staff rates and resource unit costs up-to-date and available? Resource levels have been delineated for the project, appropriate rates for each level are available, escalation factors for multi-year projects are documented, amounts and types of equipment and other materials are listed, unit costs of equipment and other materials have been secured, and other such resource costs are in place.
- Which prospective project team members are available to assist with budgeting? Project Managers, no matter how experienced, must not derive the project estimates on their own. It takes a team of individuals skilled in the various disciplines of project delivery to define and refine the estimates.
- Have the people aspects of project management/project delivery been taken into account? Project budget estimation is more than a technical and process-oriented accounting of activity durations, critical path, resource levels, unit costs, contingency factors, and the like. An experienced project estimating team considers whether the people aspects of project delivery have received as much focus as the technical and process aspects.
4 Questions You Should Ask About Your Budget
How much have I got?
This is important to know! While it’s great to think that you will have the luxury of working out the full scope, detailing the project schedule and resource plan, then costing it out and submitting that number, plus tolerance, to your project sponsor for approval, the reality is very different. By the time the business case and Project Charter have been approved, there is already a good idea of how much money is available for your project. That’s your budget, whether you like it or not.
So, it’s important to know what that figure is so that you can track expenditure towards it. If you do find then that you can’t achieve the project objectives within the amount that you have been given, that’s the time to put forward a change request to get the budget increased.
What’s my authorisation limit?
Can you sign off invoices and purchase orders? And if so, up to what value? There is normally a sliding scale of sign off authorisation limits in a company depending on the level of management. You may find that you have complete authority to sign off anything related to the project but it would be more normal to find that you have a capped ceiling on what you can authorise.
For example, you may be able to authorise expenditure up to $50k, but anything over that needs to be approved by your manager. Anything over $500k may need to be approved by a director, and anything over $1m by the board.
Establishing your authorisation limit now will save a lot of time later and avoid purchase orders being bounced around waiting for someone to approve them.
What’s acceptable tolerance?
Talk to your project sponsor about what levels of tolerance they are prepared to accept. For example, if you forecast that a particular cost will be $100 with a +/- tolerance of 10%, you can spend $90 or $110 without having to let the sponsor know about it. They may be happy with this, or say there is no tolerance, or set another percentage.
Knowing the tolerance levels gives you a little bit more flexibility with managing the numbers and ensures that you aren’t always asking them to approve a tiny bit more. You can have tolerances per budget area or for the overall project, so agree with your sponsor how they want you to manage tolerance on the project tasks.
How do I access the contingency fund?
Best find this out before you actually need to use it! Contingency funds are for unforseen problems – project disasters. They are not for planned risk responses or any other type of planned work. So if you think about when you are likely to need access to your contingency fund, it is probably going to be with relatively short notice to deal with something no one saw coming and that will have a big impact on the project.
In that sort of situation you don’t want to be spending a week finding out how much is available, how you can get approval to use it and who needs to authorise it for you. Find out all of this in advance so that the information is at your fingertips when you need it. Even if you never have to use it (and let’s hope not) at least you’ll then know what to do just in case.
Managing a project budget is critical for any business. Whether you’re just starting out or have been working on projects for some time, knowing how to manage a project budget is essential. But managing a project budget can be difficult if you don’t have the right tools and instructions. That’s where this guide comes in. It will teach you how to use Project Management software to create and track a project budget, as well as how to communicate with your team about your budget and results.
roject Budget Management: What is it?
Project budget management is the process of administering and overseeing the finances related to business projects. It’s not only about coming up with a single overall number—say, $20,000 for a particular project to be completed—but about understanding the individual cost elements and the logistics of budget tracking. It includes thinking about things like:
- How is the overall number derived?
- How will the costs be spread out across project milestones?
- How will you track project costs?
- How will you report cost data periodically—will you use project budget tracking software or some other tool?
- How will you handle scenarios in which projects are running over or under budget?
- What’s your process for learning from past projects so you can make future project budgets more accurate?
- How will you handle portfolio budget management? It’s rare that an organization has only one project going on at a time—what’s your framework for managing multiple budgets at once and in context with one another?
The project budgeting process is ongoing, and something you should be consistently working on—not just a one-time cost estimation. Costs fluctuate, circumstances change, and project elements get derailed. Accounting for these aspects throughout the life of a project is all part and parcel of effective budget management.
The Project Budget is a tool used by project managers to estimate the total cost of a project. A project budget template includes a detailed estimate of all costs that are likely to be incurred before the project is completed.
Large commercial projects can have project budgets that are several pages long. Such projects often have a large number of costs associated with them, such as labor costs, material procurement costs, and operating costs. The Project Budget itself is a dynamic document. It is continuously updated over the course of the project.
Project Cost Management Techniques
- When managing a project for a small business, the ability to contain costs is of the upmost importance. This can be a challenging task for even the most experienced project manager, particularly when there are a variety of expenses that are genuinely required for the venture to be executed without a hitch. There are, however, a few techniques that can be applied that will ensure that a project is complete under budget without compromising the integrity of the company and those associated with the project’s implementation.
- It is impossible to effectively manage the budget of a project without first estimating the potential costs included. These may include wages paid for manpower and supply costs. The estimate must also account for small incidental expenditures of which the manager may not initially think. Who, for example, will pay for the project team’s meals when they must work overtime to complete the project?In addition to determining a numeric value for each of these expenditures, the estimate should also include a variance in case of unexpected expenses. For example, if the project budget estimates two employees completing the assignment in 40 hours, it is best to budget for additional time in case the workers run into problems and are unable to complete the project in the allotted time.
- Perhaps one of the primary causes of monetary waste on a project is poor time management. In order to successfully contain costs, a project manager must ensure that everyone on his team is working as efficiently as possible. In order to accomplish this, he must effectively delegate responsibilities to each employee. Although each person should only be given a realistic amount of work, there should not, ideally, be any overlap of their respective tasks. In addition, the project manager should actively monitor the work of his team to ensure that all work is on track for timely completion.
Utilize All Tools
- In addition to human resources, there are quite often various electronic resources aimed at supporting the successful and timely completion of a project. For example, Microsoft Outlook is designed to facilitate effective communication between members of a project team, allowing them to schedule meetings, set to-do lists and quickly send messages to one another. Likewise, devices such as a Blackberry afford team members the flexibility to complete aspects of their work remotely. By effectively utilizing each of these tools, a project manager can better ensure that the project is completed on-time and under budget.
successful project management requires a well-planned and managed project. By understanding the goals of the project, creating a timeline, estimating the costs, managing the project, and keeping track of progress, you can ensure that your project is on schedule and budgeted correctly.