How To Create & Manage a Project Budget
Easily Track Expenses and Team Costs
ProjectManager.com gives you the ability to create an accurate budget, then monitor project costs and resource rates, with one easy-to-use tool. Get more control, data and visibility for your projects and your budgets with ProjectManager.com.
Whether you’re a numbers person or not, as a manager, ownership of a budget is usually a key part of your job responsibilities. It can be a daunting task, and projects can have several different types of costs that all need tracking in order to ensure that everything comes in under budget.
All of those moving parts and fluctuating costs can be better tracked with an online project management software like ProjectManager.com. We offer tools that simplify project budgeting and cost management, enabling you to set a baseline, track labor rates and add new costs on a task level. With these features, you can simply update and add items as they arise throughout the project. But before you can manage a budget, you need to learn how to create one with accurate estimates.
How to Create a Project Budget
The key to creating a project budget is to make all the line items easy to track. If you can apply a straightforward process to project expenses, then you can monitor the spending on a project accurately and timely.
Follow these simple steps for building a project budget that will set you up for success.
The first step in creating a budget is to identify expenses. You need to list every single thing that’s required to bring a project completion. This includes wages for labor, equipment, materials and more.
You’ll want to examine your project plan thoroughly and identify expenses on your own to start. Then, your team members might be able to help you recognize certain expenses that you didn’t recognize immediately, so be sure to ask them to look over your expense list when creating a budget. It’s imperative that you list absolutely every expense. The more you identify, the less you’ll be surprised by unforeseen expenditures later in the project.
Estimate All Costs
Now estimate every item on your list. If your list is in ProjectManager.com, you can add your estimate to the line item immediately. There are a number of strategies that you can use to do make your estimates. The most common estimating techniques are:
- Bottom Up Estimating: Start with the components of each task and then add them up
- Expert Judgement: Ask experts on your team to work out the cost of a task
- Analogous Estimating: Use past experience to judge how much the project tasks will cost this time.
Add up all of the estimates. This gives you the total planned budget for the project covering the cost of every task.
Add in the Extras
Extras? What extras?
Well, the cost of each individual task isn’t going to be enough, unfortunately. You still might want to add:
- Management Reserves: This is a pot of money to use at management’s discretion.
- Contingency: Contingency costs are useful to cover unforeseen costs due to poor estimating. It’s common practice to add in a contingency of 10% just in case the estimates turn out to be inaccurate.
- Risk Response Budget: If your company is mature at managing project risk, you might be able to incorporate the risk response budget separately to your main budget. The risk response budget includes funding to implement any risk mitigating actions.