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5 tips to manage your project budget

Over the last few weeks I have been writing about project financial management. Its a
huge topic, and Ive covered only a small portion of it. Here are some more tips for
managing your project budgets to end this series.
1. Work out when you will be spending
On short projects, when you will incur costs is not so important. Before you know it, all
the money will be gone. But on larger projects, you need to consult your schedule and
work out eactly when the money will be leaving the company. !ull up your project
schedule in "eavus !roject #iewer or whatever package you use and work out when the
epenses will incur.
Its important to plan out when you are going to spend the money on long projects as
time periods have an important impact on budget management. If your project stretches
over two financial years you will have to apportion your budget appropriately. $nd if
you do stretch over the end of a year, you will have to navigate the accruals process. $n
accrual is money set aside from this years budget for goods received this year but for
which you have not yet been charged by the supplier. %ompanies have different rules for
handling this and it can be incredibly complicated, so get some advice from your &inance
team or another project manager who has been through it before.
'nowing when the money will be spent allows your &inance team to manage the
companys cash flow effectively. (ill most of the money be spent at the beginning as
you invest in software or buy some new e)uipment* +ont assume that it will be evenly
phased throughout the lifecycle of the project. By looking at your schedule youll be able
to establish which phases will be the most ,epensive.
2. Watch the currencies
One of the hardest project budgets I have ever had to manage was in two currencies.
-anaging .uro costs on the same spreadsheet as "terling was very difficult and not
something I would recommend. If you find yourself managing multiple currencies for
your project budget then take etra care in how you sum the columns, and pick an
echange rate and stick to it if you can. /ecalculating the echange rate daily is no fun0
1. Add in tax
2. $re you managing your budget including ta or ecluding ta* 3his will depend
on the rules set by your &inance team. 3hey may be interested in the gross price,
that is, including ta. 3his is the actual amount the company will be paying out 4
money out the door. "o including ta is my preferred way of managing the
calculations.
If your ta rate for all items is the same, you can just add a line at the bottom of your
spreadsheet for ta. 3his has the advantage of giving you a ta5eclusive and a ta5
inclusive budget figure. However, it might not work if you are not paying ta on all
elements of your budget, so be careful.
4. Do you really hae to track time!
(hether your company does project charging for resources or not, all resources have
some cost, and your project sponsor might be interested in tracking this. By documenting
the fact that you have resources that are non5chargeable 6if that is the case7, you can have
a discussion about how to record the effort associated with those resources. If your
sponsor is only interested in cash out the door, it will not be necessary to report how
many days the ,free human resources have spent working on the project.
5. "stimate as a range
8iven the fleible nature of budgets, and projects in general, its very hard to pin down
costs to an eact figure at the early stages of the project. $nd its not a good idea either,
unless you are absolutely 9::; sure that your estimation is spot on and will not change.
"o if you can use ranges for your estimates, do.
!resent your estimates as a range rather than a fied sum. 3his means your overall
project budget, once you have added up all your estimates, will be between < and <y.
Its this range that you present to your steering group and sponsor. !resenting a range
means a little more fleibility later on. It also gives you the chance to start managing the
epectations of your sponsor and it is a way to manage uncertainty in your estimates.
1 # What is your $1 %rustration as a project manager!
I came up with what I anticipated to be the top eight main frustration categories for !-s.
I was close 4 seven of the categories saw action. Only =lack of
training>knowledge>eperience failed to receive any response. $t least our readers are
feeling a little less let down by their organi?ations in terms of training 4 though an earlier
survey with a differently worded )uestion would tend lead us to believe otherwise.
3he leading frustration factor cited was @ack of -anagement "upport at AB;. !oor
%ommunication in the Organi?ation followed at A9;. @ack of !- $uthority and
+ecision5-aking $bility was net at 91; and @ack of !lanning 3ime $llowed came in
fourth at 9A;. 3hat figure tells us that !-s are feeling frustrated about the senior
management 6or possibly customer7 pressure to get started without allowing enough
planning time prior to starting or without allowing enough planning time to go into the
project plans early phases.
3he remaining options have very few responses making them fairly insignificant. 3he
=OtherC responses did make up 9D; of the feedback with some interesting responses
including 6Im generali?ing here7 things such as =too many processes,C =1
rd
party
vendors,C and =poor handoff from "ales to !- 6which is one of my stated pet peeves7.C