Three Tips for Managing Your Project Budget
Updated: Aug 1, 2022
Budget management is one of the fundamental components of strong project management. Without being able to effectively see where your budget is heading, it will not take long for you to lose the confidence of your project executive and leadership. Here are some tips on practicing good budget management.
ABF – Always Be Forecasting
When managing projects, your budget is the number 1 or 1a thing that your stakeholders will always ask you about (schedule being the other). While you cannot change the past (i.e. the amount of budget you’ve consumed) you can - and should- always understand what is in front of you and what it’s going to take. The way to do this is to always be forecasting your project. Understand the scope of work remaining, and the perceived effort required to deliver the scope. Comparing that against your remaining budget will enable you to answer the question on if you have enough budget remaining or not and allow you to engage your project sponsorship to help solve this problem.
Know Your Numbers, Know Your Project
Knowing the numbers is key to solid budget management. Taking into account the budget and how it was arrived at (i.e. initial estimates) enables the project manager to model out different scenarios as the project progresses. We know your project will not take a straight-line path to the finish line so it’s important to understand the basis of your budget so that you can effectively assess risks and issues (a.k.a. threats) to your budget and deal with them accordingly.
Be Realistic….At Best
When it comes to estimating, we always want our teams to be as realistic as possible so that we don’t get into a situation where we have over-committed to our project stakeholders. So why as project managers should we be any different? When we encounter threats to our budget we need to deal with them as realistically as possible. If there was a piece of scope that was under-estimated, we deal with it by being transparent to our customer and also by making sure that we do not repeat the mistake of under-estimating. Bear in mind that we do not want to be overly pessimistic either for fear of our customer losing confidence in our ability to estimate.
Managing budgets is an arduous task and can literally make or break an otherwise good project. Being aware at all times of what your numbers are, what they should be and what they will be will set you up to always be able to answer the question “how much will this cost?”