A project is work undertaken by a person or a group that has to be completed before a specified time, called a deadline. It requires time and effort, and especially finances. To execute a project successfully, a manager has to consider many crucial factors of the organization and the client. One of the most important things to consider is the budget.
In an inhouse project, the management usually sets the budget. But if it's a client project, the client sets the estimate and the deadline which has to be considered by the project manager.
What is a Project Budget?
The project budget can refer to an estimate of the overall expenses that are to be incurred on a specific project, or the maximum expense limit set by the client for deliverables. It consists of several factors such as labor, resources, and the scope for additional finances if the need arises.
Typically, on a client project, the company bills clients not only on the output but also on the hours that are put in by those working on the project. Here is an explanation on budget planning for project.
Tips on Managing a Project Budget
Proper Resource Allocation
Proper resource allocation is very significant in estimating or planning the project budget. A manager should make it a point to coordinate which employees will perform what tasks, and what are the supplies required for starting out.
He should analyze the available resources possible to be used and the supplies or skills to be brought in. To rule out the chances of any loss or wastage of resources, the manager should choose highly skilled employees for the project.
Using Budget Management Software
Nowadays, managers can manage the project cost using effective budget management software. These software help to keep a track of the estimated budget and actual expenses. Make sure every transaction and expense detail is recorded in the software.
In addition, these software have different modules which enable budget planning to be merged into other functions of the project. This eventually leads to effective management of the overall project.
Proof of Expenses Incurred
Along with managing budget records in the software, you should also obtain hard copies of the transactions made and expenses incurred. This is particularly a case in manufacturing or construction projects. The copies have to be attached to periodical reporting of project advancing to the management or appropriate parties.
Collecting purchase orders and expense receipts also helps in cross checking with the software if the correct entry has been made. The hard copies serve as a backup to the details recorded in the software.
Reviewing Budget Periodically
A manager should also keep a track of all expenses in detail. Ask all team members to give a status of the actual work done and the resources spent, used, and are available.
Reviewing budget factors and amounts is normally done weekly as a standard. This allows you to cut down the expenses on resources, right at the time they are used. This certainly enables the manager to modify the project plan as required.
Good Communication of Budget Risks
When it comes to budget planning and management, healthy communication among those involved in the project is also a requirement. It is extremely important that a manager assesses any risks concerned with an increase in budget expenses.
If the budget expenses are predicted to go beyond limit, the manager should inform the client about the same. Besides, he should also inform the HR department and accounts department about the need for change in budget. Doing so will prevent the delay that may happen due to budget issues.
To manage a budget, see if the expenses can be reduced on transport, overtime, material and supplies, etc. Following these guidelines will help you to keep the budget under control without having an impact on the quality of deliverables. Remember that budget planning and management is an integral task in efficient project management.