Project Budgeting Tips

by Sambittin Execution, Ideas & Conceptson Posted on

Here are a few project budgeting tips to keep in mind when working on the project plan and the budget.

  • Level of details of the budget depends on the culture of the company. (In fact, in many companies, the budgeting is taken care by financial specialists who take the planning details from the project or program managers including the resourcing).
  • Managing the cost would depend on many factors namely:
    • Contract Types. This could be:
      • Time and Material (Mostly suitable for RnD type of projects)
      • Fixed Price (Mostly preferred for construction taken up through contract).
      • Fixed Price + Incentive (If the work is completed before time, the vendor receives an incentive. This can also have a clause where a delay can result in the vendor paying to the customer on a per day basis).
    • Management of staffing hours (Mostly time tracking sheets). One needs to check on any extra pay due to additional work hours.
    • Understanding the business financial reporting and frequency.
  • Budget and Scope trade offs needs to be continuously looked into at regular intervals. Factors to look into are:
    • Can scope be delivered in the same schedule?
    • Do we need more effort due to project unknowns creeping up? If yes, what is the extra cost involved in terms of resources and materials and thereby the additional cost.
    • Do we have more funding to accommodate the increase in scope? Do we have the buffer? Do we have contingency reserves and management reserves on top of it? How critical is the project and ROI to allow for such reserves?
    • If there is no extra funding, do we need to reduce the scope in case there is a delay/
    • Can we deliver customer expectations, timelines and maintain the quality by delivering the project using cheaper infrastructure or components/ materials?
  • Identify the cases for bloating before hand:
    • Are the estimations bloated?
    • Are there unanticipated complexities causing the effort, timelines to increase and increase the budget?
    • Is there any change in the budget by management itself due to change in the priorities of the project? Incase there is a change say, reduction of resourcing, can we still manage with less resourcing and still manage to delay the timelines and meet the budget and customer expectations?
  • Cost Cutting Options:
    • Regularly keep a track on how the cost can be reduced in terms of:
      • Alternate infrastructure and materials.
      • Cheaper resources
      • Contractor/ vendor pricing

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