No plan survives reality, and project budgets are no different. This video discusses techniques to apply when issues and changes put your budget in jeopardy.
- When you stop to think about it, the fact that projects actually are delivered successfully is a small miracle. Risks abound, decision-making can be erratic and project requirements could be missing or misinterpreted. And there is the potential for little, picky budget issues. Let's take a look at a few of the common little budget process issues that, if overlooked, could create unexpected cost overruns. First, check the time periods on your cost data.
If you don't get the information in a timely manner, you may not be reporting a true picture of your budget situation and when you budget status is out of wack, you can't make informed management decisions. In addition, check to ensure all the cost data you receive is for the same time period. Calendar months and accounting months can vary by a few days. Resolving data that's been collected for a calendar month against data collected for an accounting month can drive you crazy because they'll never match.
Make sure everyone is sharing data for the same reporting period. The second item is to check all purchases against your budget. Sometimes, items do not appear in the estimates you receive but will show up in an invoice that is posted to your cost account. This is especially true in matrix organizations where you don't approve every purchase that may affect your account. The third little big thing you may want to check are the cost codes assigned to your project in your company's accounting system.
You don't want charges assigned to your project that belong to someone else's because it can make things appear like you're over budget when you're not. Potentially worse, however, is when your project costs are assigned to codes outside of your project. This can lead you into thinking that you're at or below budget. So, here are a few quick checks you can do to ensure all of your charges are hitting your books properly. Are vendor costs hitting your books as expected? Are labor hour costs captured in your cost spending reports? Typically, you don't have to check each individual team member.
Checking one team member from each team will probably cover you. Have you accounted for travel costs that may be needed? Are you going to be charged for overhead items such as telephones or management time? You should also note the frequency of when these charges are allocated. It might be weekly or monthly and in some cases, I've seen quarterly as well. Ensure you know when these charges are coming. For more extensive lists of potential budget issues, check out the document I've included in the exercise files.
These are little things but ones that can make a big difference. Administrative checks of your budget and spending data can save you lots of heartache and late nights trying to make sense of project spending information.
Note: This course follows the latest guidance from Project Management Institute, Inc., as outlined the PMBOK® 6 Guide.
- Recall best practices for project budgeting and estimation.
- Distinguish common estimation approaches used to build project budgets, and understand when to use them.
- Identify best practices for budget expectation management, while utilizing sound budget refinement techniques.
- Describe and explore agile project budgeting techniques.
- Review various approaches for correcting project budget overruns.
- Review sound budget reporting approaches, including how they can be used to report project status.
- Recognize the issues and changes that can put a project budget in jeopardy.