Financial Planning for Project Management
A lot of project managers will probably cite budget management as one of their least favourite tasks, but nearly all of them recognise it as one of the most important.
Project managers are accountable for ensuring that projects are delivered on time and to budget. Without creating and tracking their expenses then this goal is made a lot harder to hit.
Creating a budget
It is good practice for project managers to create a budget a long time before work on the project begins.
Generate separate budgets for equipment, people, real estate, legal, travel etc. to create an overall budget. Some of these costs will be fixed. Others will be variable.
This should be discussed, defined and agreed with those who are in control of allocating funds. This takes time and managers should give plenty of notice to those in control of a budget.
Tracking your budget
It is relatively common for projects to go above or below budget as time goes on.
It is essential for managers to keep track of this and address any differences as soon as possible. This will allow them to make changes to any processes that are costing too much money or request more money in plenty of time.
A lot of managers make use of specialist project manager software in order to track their daily spend. Others use basic spreadsheet software.
It is often a good idea to use cloud-based software to track your budget, so you and other project managers are able to access it from any web-enabled location. This will give you no excuses for tracking spend in real-time.
There are formulas available to help calculate what the final budget is likely to be based on current spend. Processes like earned value analysis, which compares savings or overspend to the planned value to make a forecast for the entire duration, can prove vital to successful budget tracking.
Tips for staying under budget
The greatest project managers are experts at negotiating an initial budget and ensuring they don’t overspend. Transparent communication with those who assign the budget is crucial.
It’s no use being disingenuous when it comes to variable aspects of your budget only to request more cash later on down the line.
Those who take the time to accurately predict how much money is needed to complete a project will be far less likely to find themselves needing more.
It can also pay off to delegate responsibility for certain parts of the budget to other members of the team. This will take a weight off the manager’s shoulders, providing that staff members hold themselves accountable for whatever role they are assigned.
Managers need to be able to motivate their staff members to complete their work on time as well. The more time it takes to complete a project, the more money tends to be spent – so motivational skills can be as useful as financial prowess to an extent.
There are courses which managers can take to learn more budgeting skills. Becoming a master at this is great way to keep your boss very happy.