How to Successfully Manage a Project Budget

By: Ali Broders

We all have experience managing projects – whether it is one of your key responsibilities at work or in your personal life with a home renovation, planning of a wedding, social event or party, or even a family vacation. All of these examples require a deep understanding of the resources available to you, a plan of how to utilize these resources, and most of all the ability to effectively manage the budget for the project.

Project management principles should be applied to effectively manage project budgets. A project budget differs from an operating budget in that a project occurs over a finite period of time. This is unlike an operating budget, which is ongoing and repetitive.  A project should have a clearly defined scope and distinct start and finish dates.  It is essential to understand the work that is necessary, and the resources required to complete the project. From there you can begin to establish a representative project budget.

Ali Broders has a thorough understanding of the complexities of project management. Having worked in the transition planning industry for more than eight years, she has worked on more than 20 projects varying in size and complexity. As a Project Management Professional, she integrates key principles from the Project Management Institute including scope, resource, and risk management. Over the years, Ali has become an expert in the management of project costs and budgets and below are a few of her best practices for effectively managing a project budget and ensuring the successful completion of that project.

Engage your Team

At the beginning of a project, I engage my team in the development of a realistic budget. Involving key team members will provide a more accurate estimate of the resources required to complete the project. By building the project budget together, team members gain a sense of ownership and responsibility for the budget. This allows them to more accurately predict the amount of time and resources required to complete each activity. Establishing this relationship with your team from the start of the project makes it much more likely to stay within budget. Once established, share the project budget with your team and store the file in a shared location so that the latest version is accessible to the team. Schedule regular meetings with the team to review the budget. This will hold everyone accountable for their components and allow for a more transparent understanding of the project status.

Plan with the End in Mind

Project budgets are unique in that they typically are not evenly dispersed throughout their duration. Expenditures start slowly during the planning phase, then ramp-up quickly as the project progresses to the activation phase, with more resources being utilized. As the project moves towards completion, expenditures decrease. This is often visually reflected with an S-curve graphical representation. It is critical to budget appropriately for the surge periods during which resources are heavily utilized.

Expect the Unexpected

A responsible Project Manager realizes that not everything always goes according to plan. I have been on my fair share of projects during which construction delays have led to the addition of three to six months of unanticipated project scope. These unanticipated costs will arise over the course of a project so when developing your project budget, allocate a contingency (or emergency fund) to account for these unforeseen costs. The contingency amount varies based on the level of risk exposure for your project, but as a general rule of thumb, I typically estimate an additional 10% of the project budget. Planning and allocating contingency funds from the beginning will make it much easier to weather unexpected costs when they come your way.

A budget is telling your money where to go instead of wondering where it went.” Dave Ramsey

Review and Adjust

As you begin your project, schedule regular occurrences to review actual expenditures against what was forecasted. Include your team in these reviews to keep them informed of the current budget status. Assess the variance and evaluate the cause. Did a planned expense not occur that month that should now be expected the following month? Did the team work more hours than anticipated to complete a deliverable that can now be removed from future months? Or, were your initial estimates inaccurate and will this continue throughout the remainder of the project? It is much easier to correct a budget overrun early in the project than after it has impacted the project for several months. After assessing the variance, work with your team to review and adjust your forecast through the remainder of the project.

Every project is unique in scope and size but, “The successful management of a project budget directly correlates with the measurement of the project’s success.” Key stakeholders’ value the ability to deliver projects on time and within budgets, so remember to remain engaged with clients and offer realistic expectations. This will create a mutual relationship based on trust and understanding and will most likely result in those stakeholders remembering your hard work and diligence when they are planning their next big project.