Join Bob McGannon for an in-depth discussion in this video What is a project budget?, part of Project Management Foundations: Budgets.
Bankruptcy leaves a really bad impression. If you don't establish, manage and control costs on your project, you can end up with a bankrupt project, where costs exceed benefits. To avoid this dreadful fate, you should control costs while delivering your project outcomes. The project budget is a valuable tool for you to insure that your spending doesn't exceed your cost limit. When a project budget is done well it gives you the necessary steps and controls to guide you through the core constraints that are part of every project, also known as the triple constraints.
They're schedule, scope and cost. A comprehensive project budget doesn't have to be complicated but it does have to take into account these constraints. Here are my suggestions, for creating a good project budget. First, focus on all three of the triple constraints. If you ignore any of these constraints, you can end up spending too much time focusing on the projects product to be delivered, and end up spending more money than is feasible or practical.
An analysis of what you can and can't do, and what the costs will be, is important when creating an accurate budget. Second, think about your project from start to finish. When doing this, ask the following questions, how much money has been allocated for the project? What expenses are mandatory? Which expenses are less vital to project success? Can I create realistic and dependable estimates? And if not, what research do I need to do to produce them? Third, look at the major areas of expenditure in your project.
Now this can vary the typical budget specifies cost for staff labor Materials procurement and other direct costs such as travel and communications. I suggest you spend a good amount of time determining the cost of each of these. Seek out any historical information from similar projects if you can. Ask people to share their experiences. Doing these things will help you piece together a more accurate budget. Fourth, discuss contingency dollars with your sponsor because projects can be a bit unpredictable.
Contingency dollars is money you set aside to address risk factors on your project Such as technical difficulties, that may affect the project. At the end of the day, a project budget should not be a random prediction. It needs to be a realistic evaluation of the costs for all the tasks that you identified in your work breakdown structure. For more information on the work breakdown structure, check out Project Management Fundamentals with Bonnie Biafore here On lynda.com. Lastly, consider the information you will need to support your sponsor with cost and benefit data for the project.
This means having a balance between the money you are spending, and the benefit it will bring to the business. Keeping this is mind, can help you manage expectations with your sponsor and key stakeholders In this course, I will give you hints and tips for sharing your project budget and cost expenditures in simple, easy to understand ways. This will help you ensure management is happy with your budgeting and cost management. This is important because if your project appears to be too costly, you project could be canceled.
In instances where you believe your costs are too high I will help you think of ways you might reduce scope, or cut costs, without adding too much risk. Building your project budget can be a tedious, detailed process. However, the time and effort you spend building an accurate budget, could pay you back ten fold as you track and manage the cost of your project.
Lynda.com is a PMI Registered Education Provider. This course qualifies for professional development units (PDUs). To view the activity and PDU details for this course, click here.
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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.