This video discusses smart practices for setting up your work breakdown structure (WBS) to make project budgets easier to manage. In addition, it highlights other project planning documents that need to be considered when building a project budget.
- Have you ever been asked to meet for dinner in the city? While you may have a general idea where you're going, you'll need more specifics to arrive at your destination. Building a budget without specific project deliverables is a bit like that. You may have an idea of what you have to do, but you need more specifics to achieve your final outcome. Let's look at the steps you need to follow so your project budget fits the bill, so to speak. First and most important step is to create an initial budget from your work breakdown structure, or WBS.
A WBS is the logical grouping of things that need to produced by your project. Items in a WBS are broken down into tasks or work packages that can be assigned to a knowledgeable person to handle. You then assign costs to each task. Assign control account numbers to tie with your accounting system and roll them up to create an initial budget for your project. Next, you compare your initial budget to your sponsor's cost expectation. You can then help set or adjust those expectations and refine your initial budget by comparing your results to cost data taken from other projects.
You're not done however, as the WBS isn't the only project management deliverable that should be used to refine your project budget. I recommend evaluating your schedule, risk management plan, procurement, and quality plan deliverables. Your schedule should include the activities from your WBS, however the schedule will also show when you will be spending funds. Your sponsor and finance manager will want to understand spending by quarter, or by month, for forecasting purposes.
Your risk management plan should detail not only risk that can surface which affect the project, but the costs associated with mitigating those risks. Mitigation costs need to be include in your budget. However, when risks pass by and do not come to fruition, you may adjust your budget downward for mitigation costs you no longer have to consider. Procurement plans not only detail the costs of buying products you may need for your project, but may also include primary and alternate vendors.
Using an alternate vendor can change your purchase and shipping costs, and need to be considered in your overall budget. Lastly, your quality plan outlines the evaluation or test processes you will use to ensure the product of your project is appropriate. It should also outline what to do if your product fails a test. Ensure you understand these activities and how they may impact your project budget. For a more comprehensive list of how other project tools can affect your budget, check out the document I included in the Exercise Files for this course.
It's critical to put together a sound budget for your project and by using a small, standard set of project management tools, you can make this much easier.
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.