Join Bob McGannon for an in-depth discussion in this video Applying foresight to your budget status, part of Project Management Foundations: Budgets.
I thoroughly enjoy having and using a GPS system when I'm driving. Not only does it give me a bit of comfort that it will guide me to where I want to go, I can take a peek at it to understand if my next turn is going to be left or right and put myself in the correct lane ahead of time. In other words, it gives me a bit of foresight. As a project manager, I like to rely on a bit of foresight as well. What's going to happen? How is it going to happen? When's it going to happen? Having foresight can be one of your greatest assets as a project manager.
It give you the ability to see what's coming around the corner and to plan for it, just like having a GPS. I like to try to apply foresight to many parts of a project, especially when it comes to predicting budget status. Here's how. First, try to think ahead as you manage and control your project execution. Were your assumptions right? Is the quality of team members at the right level? How could resources be used more efficiently? For example, a potential assessment you may need to make, is whether you should use a more experienced team member for fewer hours.
This maybe be cheaper and a prudent step, assuming you can assure it will not adversely effect the timing or scope of your project. Second, when considering tasks for budget management, you should remember that not all tasks can be affected by a change in staff, or the number of staff members you apply. To illustrate by example, I like to think of project tasks as fill the truck tasks, and drive the truck tasks. Sure, eight people will fill the truck faster than two, but at some point too many people will get in each other's way.
The ideal number to fill the truck may actually be four or five. For drive the truck tasks, yes, you could add people to do the task, but you will only ever be allowed to drive at the speed limit. No matter how many people you have driving the truck at any one time, you can't go any faster. Understanding these sorts of conditions for your project tasks and, in turn, your budget flexibility, is important. Costs will vary. So when you're looking at your budget status, apply your foresight and ensure you understand the nature of your project tasks.
In addition to the budget reports I presented earlier, ensure you use a mix of three types of reports in your project manager's tool kit. There are project reports, which look from the beginning of your project to now. There's the status report, which asks where are we right at this moment. And there are forecast reports, which take your actual spending and compare it to your plan, to plot what future spending might be. For example, thus far on the project your average actual spending might be exceeding your plan spending by 15%.
A forecast report would then project what amount of money you will spend if your actual spending continues to track at 15% above your plan. You can also make adjustments to the forecast report with what you believe your actuals will be. In other words, you can create "what if" scenarios. The forecast report will show the results at the end of the project for those scenarios. My last tip is to have alerts built into your spending reports, to let you know when you are coming to the end of a purchase order amount.
For example, if you have $100,000 to spend, you may want to know when you've spent $80,000. This would be instrumental, if you still need to spend $50,000 to get the work done. With forewarning, you might be able to reduce costs in other areas of the project, or request additional funding with time to conduct reasonable negotiations. Applying foresight is all about managing your risk. Forward thinking and reasonably accurate information will help you effectively manage both risk and your budget.
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- Discovering costing standards
- Examining capital and operating costs
- Assigning costs to resources
- Communicating your budget
- Recovering a bloated budget
- Addressing budgeting issues<br><br>
- The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.