Every good project manager knows that it’s impossible to meet the desired goals without enough financial resources. Hence, they undertake enormous efforts to plan and control the use of the money during the course of work, and budget management plays a huge part in this process.
- But how to manage project budget well?
- Which steps should you undertake in order to make it accurate and truly useful?
- And what do you need to consider when developing a budget yourself?
This guide provides an in-depth answer to these questions and explains how such a fine time tracking tool as actiTIME can support you on your budget management adventure.
Let’s start with a brief overview of the budgeting process, its major benefits and the basic rules behind it.
Project Budget Defined
A project budget is a comprehensive summary of all the costs that a project is expected to incur throughout its life cycle. It gives a precise account of different types of expenses linked to various project activities. It includes cost estimates for separate tasks and calculates the total amount of money required to complete the planned works successfully.
As such, there are two major things you have to pay attention to when creating a budget: resource planning and cost estimation. The former lets you identify all the financial needs of the project, and the latter helps to figure out all the expenses those needs are associated with.
Once the budget is created, you also should track project progress to see whether your team adheres to the set estimates or not. And if something changes in your work plans, you have to update the developed budget as promptly as possible to ensure it reflects the actual situation well.
5 Benefits of Having an Accurate Project Budget
When managing your budgets the right way, you will:
- Verify that your project goals are attainable and performance needs are feasible to satisfy.
- Prevent unexpected spending and reduce the risk of cost overruns.
- Obtain economic justification for your project and see if it’s going to be profitable or not.
- Learn how to prioritize project tasks and redefine your performance tactics to guarantee greater success.
- Get clear guidance during decision-making on project spending.
3 Tips on How to Manage Project Budget Well
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Consider both short-term and long-term objectives.
You need to understand what your team must accomplish at different stages throughout the project’s life cycle. Hence, a detailed work breakdown structure is always good to have. It will help you to ensure an optimal allocation of financial resources across the project timeline.
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Use evidence to calculate the budget.
Don’t rely on your intuition too much. Analyze data, seek expert assistance, and consider as many external and internal factors and risks as you can when estimating project costs.
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Apply appropriate estimation techniques.
Remember that some simpler methods are good to implement at the initial stages of project planning. However, developing an elaborate and highly accurate budget calls for the use of more advanced instruments.
Manage Project Budget with actiTIME
1. Build a detailed work plan (and visualize it)
Before calculating a project budget, you need to create a thorough project plan. You have to:
- Identify all the objectives and goals that must be attained,
- Understand which activities will help you achieve them,
- Determine which and how many resources are required for effective project performance,
- Document your needs and create a list of the planned tasks.
In other words, you can’t proceed to craft a budget without defining the scope of work first. And actiTIME can help you fulfill this task with ease. Use it to visualize the work scope for any project and plan the workloads in a straightforward manner:
- Create customers, projects and tasks in your actiTIME account.
- Add informative descriptions, set deadlines and time estimates for different tasks.
- Assign the created projects and tasks to relevant employees.
As a result, you will form a clearer picture of all the activities and labor resources necessary for project realization, which is essential for completing the next budget management steps effectively.
2. Estimate costs for different tasks and sum them up
The second step is to estimate all the costs that the planned project tasks are going to induce, and there are many ways to approach this endeavor:
- Analyze the market situation to understand how much your raw materials will cost,
- Ask multiple experts to do the forecasting and share their opinions,
- Review performance data from already completed projects to see how much money may be required to deliver a similar new one.
If you choose to apply estimation by analogy, actiTIME can readily supply you with historical data on staff-related project costs.
To retrieve it in your account at any point in time, you simply need to set the cost of work rates for all employees involved in a project, ask them to track working hours consistently and, when the project is completed, run the Cost of Work Report for a period of choice:
Overall, if you’ve tracked hours spent on any project in actiTIME from the very beginning to the end, you will have a comprehensive summary of all labor costs that the project incurred. And you can utilize this historical summary to calculate costs for a new project of yours by following these steps:
- Identify all the new project tasks that are similar to the ones from a completed project.
- Locate the historical cost tracking data for the latter in the Cost of Work Report.
- Analyze the data to see how much labor expenses the newly planned project may entail.
With this simple method, your task estimates are bound to become more precise. In the end, just sum them up, and you will see how many expenses your project will incur overall.
3. Consider risks and previous budgeting mistakes
The business environment is never static, and you can’t expect everything to go according to your plan 100%. Even minor changes in a predetermined way of work are linked to significant uncertainty. Thus, it’s crucial to consider the risks and add contingency into the picture.
Try to think of various things that could go wrong during project management and estimate how much time and money you will require to handle the problems well.
Referring to historical data is useful in this case too. So, be sure to look through various performance reports for already completed projects in actiTIME:
- Identify whether your team ever failed to meet the set time estimates or if you had some massive cost overruns in the past.
- Take into account your previous performance failures and budgeting mistakes.
- Then, apply this information to adjust your new estimates in a way that leads to better budget management results and superior project outcomes overall.
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4. Stay on the right track (and update the budget when needed)
A well-developed budget will help you monitor and measure project progress. However, since changes are inevitable, you need to be prepared to adjust and edit your budget in accordance with the shifts in the external environment and your business’s internal situation.
To succeed with this task, it’s essential to keep tabs on your team’s adherence to the budgeted estimates and regularly analyze current performance trends in order to identify potential problems and needs for budget adjustments early on.
actiTIME’s robust functionality is in handy in this case:
- The Cost of Work Report and the Profit/Loss Report can be generated to review your projects’ labor costs and revenues both historically and in real time.
- Besides, you can always make use of the app’s automatic notifications feature that may be configured to alert users on the risks of budget and schedule overruns.
These software features can help you stay aware of any issues in terms of budget compliance. And as for actiTIME notifications, they’re going to be particularly useful if you’re a busy manager with too many things to pay attention to and just have no chance to monitor performance data daily on your own. Use them to maintain high-quality cost control, manage project budgets the right way and bring your projects to success regardless of how heavy your workload is.
Ready to try sounder project budgeting with actiTIME? Sign up for a free trial here and give it a go!
