How To Successfully Manage Your Project’s Budget
You’ve just got a project off the ground and your client is expecting great things. But do you have a firm budget management plan? If you don’t, there are a number of things that could go wrong. You could end up over delivering and wasting precious resources. Worse yet, you could end up under delivering, because you didn’t set aside enough time for project planning and budgeting.
Project budget management isn’t just jargon for a rough plan; it’s the driving force behind your entire project. It’s what helps get everything off the ground successfully – and keeps it there – right until the very end. No more losses, under delivering, or broken promises. Just a clear forecast of what you need, how much you need, and when you need it in order to deliver your project successfully.
What is a project budget?
Think of a budget as all your project costs added together. It covers everything from labor, material, and operating costs to all the activity costs that you’ll come up against during your project’s timeline.
It gives you a clear idea of your total estimated project expenses, arming you with the information you need to decide whether the project is feasible. After all, the last thing you want to do is commit to a huge outlay if the project is not going to deliver a good ROI (return on investment) for your business.
The more you make your project budget a priority, the better you’ll be in the long run. Not only will you have clearer financial forecasts, but you’ll also be able to look back at previous budgets and get a better idea of the kinds of things that work.
Project budgeting solutions to suit every business
Managing a project budget doesn’t have to be a long and lengthy process that eats up all your time. There are a wealth of different project management software resources out there that can help automate processes and support you in project budget tracking and planning – you just have to decide which is right for you.
Thanks to improvements in tech, cloud-based budgeting software has made the job a lot easier and with platforms like Scoro, you also have access to a range of tools to assist you in billing, quoting, and time management.
How do you create a project budget?
Use this step-by-step guide to help you craft a project budget management template, but keep in mind that certain factors and resources might change. This is why it’s so important to continue to track your project’s budget throughout its entire timeline (more on this later).
- Look back at the data
If you have previous project budgets available, analyze what went well and what didn’t, and what to steer clear of. Looking back at historical data will also give you a rough idea of where to actually begin with your budget. If you haven’t already, it’s worth trialing some project management budgeting software that manages all your budget planning, tracking, and management from the cloud. With a platform like Scoro, you’ll be able to create and plan budgets with ease, freeing up time for you to focus on what’s most important.
- Monitor your project team’s effectiveness
It’s important to keep an eye on team performance when it comes to managing and keeping to a project budget. Again, use historical data if you can to get an understanding of their strengths and weaknesses. If some of the team struggle to stick to a budget, for example, you’ll need to reiterate the importance of regular tracking.
- Develop a project timeline
Before you can start budget planning, you need to come up with a timeline so you can scope out how long you’ll need to complete the project and whether you can drum up finances fast enough. You’ll also need to start bringing your budget together, and that involves listing all the resources that you’ll need. Some of the resources you’ll want to consider include:
- Staffing costs
- Equipment and operating costs
- Marketing costs
- Training costs
Once you’ve set this out, you can start calculating an estimate of all the costs you’ll need to deliver the project.
- Seek approval from the project team
Before you can start putting your budget into action, you’ve got to make sure everyone on the team has agreed to a final figure. There should be no discrepancies and no errors – everyone, including executives and stakeholders, needs to be in on the budget. This will help iron out problems early and will get rid of any miscommunication.
How to calculate budget in project management
There are a number of different calculations that you might want to use when calculating your total project budget. We’ve outlined two of the most popular below:
- Estimate to complete (ETC)
ETC is the expected cost it will take to finish the project. EAC stands for estimate at completion and AC stands for actual cost.
Calculation: ETC = EAC – AC
- Estimate at completion (EAC)
EAC is the expected total cost of completing the entire project. BAC stands for budget at completion and EV stands for earned value.
Calculation: EAC = AC + (BAC – EV)
Tracking your project’s budget
Now that you’ve got your project budget set up, there’s still one crucial point that shouldn’t be overlooked – tracking. If you can’t track your project’s budget, you won’t be able to understand how it is actually performing in real time.
Let’s say one of your projects is taking longer than expected because you’re understaffed. Without a proper tracking system in place, you won’t be able to figure that out until the end, by which time it’s too late. You’ll end up having to expend additional resources and go over budget to ensure the project is completed on time.
- Set a baseline
Setting a baseline will help you gauge the amount of progress you’re making on a project. You’ll want to set a baseline start and finish date for each activity you have planned, updating it as any changes occur.
- Keep a record of all project changes
As soon as you encounter any kind of tweak or update to your project that affects your budget, be sure to note it down.
- Leverage project management software
Tracking your budget on paper and spreadsheets can get a little messy. Not only do you have to collect and compile all the information yourself, but you also risk a great deal of human error. With project management software like Scoro, you’ll be able to plan and track your budgets with ease, without any of the hassle or mess associated with manual tracking.
With a built-in budgeting and finance dashboard, Scoro makes it easier than ever to gather all the data you need in one central location. For every project that you’re working on, Scoro will help you track it against your actual revenue and expenses.
More than just budgeting software, Scoro can also help you achieve your wider organizational goals. Bringing together a suite of tools from budget-tracking to billing, invoicing, and time management, you’ll be able to manage projects throughout their entire pipeline with efficiency and ease.
How can I manage my project budget effectively?
Once you’ve covered the basics, there are still a few things you can do to make sure your project runs smoothly and your budget stays on track.
- Get all stakeholders and team members involved, and ensure everyone’s on the same page
- Establish key performance indicators (KPIs) that help you understand how much you’ve spent on your project compared to your actual budget. AC, cost variance (CV), and EV are all common KPIs used to aid in decision-making. Read on: Key Performance Indicators: Ultimate Guide.
- Automate the budget management process with end-to-end work management software like Scoro.
- Regularly review your budget and update it as soon as you come across any changes.
- Leave some wiggle room in your budget – you might come across a few changes during your project’s timeline, and having some extra room will make it easier to nip problems in the bud early on.
- Continue to monitor your resources. This will stop you from going over budget and spending too much on labor and operations.
Are you managing your project’s budget effectively?
The whole budgeting process can be a nightmare if it’s done manually – compiling all the data, reviewing it, and updating it can eat up too much of your precious time. Time that could be spent on more important tasks – and this is where the power of project management software comes in.
With Scoro, you can easily manage and track your budget from one central location. No more toggling between different apps and no more messy spreadsheets. Just a clear overview of your budget and performance.
Scoro even answers the question of how to manage project budget effectively alongside your wider organizational goals. With built-in billing, invoicing, and time management solutions, you’ll be able to work towards all your goals smoothly. Sign up today to start your free trial.