In this article, let us go through the steps to come up with the project budget.
- Create an initial budget using the WBS
- Once you have the WBS created during the planning phase, assign resources to the tasks.
- Add the capital/machinery/equipment and overhead expenses as well.
- Associate and link it to the accounting system and to the employee database linked with the remuneration.
- Compare your initial budget to your sponsor’s cost expectation
- Ensure that the initial budget that you arrive at is compared and aligned to your sponsor’s cost expectation.
- If the initial budget overruns the expected cost expectation of the stakeholder, check where you can cut the cost. Revisit the plan to see what are the mandatory tasks that need to be done for the project delivery, Look for Gold plating or optional deliveries that can be removed or planned for a future delivery. Refine the plan and thereby the cost.
- One can also look for cheaper but reliable alternatives.
- Refine your project budget
- Refine your budget by looking and evaluating the schedule, risk register, procurement plans, and quality plans.
- Budget at Completion Baseline
- Finally, after all these considerations and several iterations, arrive at the baseline project schedule and thereby, the BAC (Budget at Completion).
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