Effective budget management is a primary area of focus for project managers who value their careers.
Few companies have an unlimited budget, so the first thing project stakeholders look to in determining whether their project was a great success or a colossal failure is the bottom line.
Project managers who carefully watch budgets throughout the lives of their projects will keep stakeholders and management happy and thus experience greater project and career success.
Here are a few tips to maintain control over your project budget.
* The first step to an effectively managed project budget is to ensure project requirements are accurately identified, documented and confirmed with all stakeholders — and that these are communicated to all parties involved.
This crucial step should be completed before budgets are set.
Many projects have been initiated around needs but executed around wants, automatically putting projects at risk of budget overruns that leave everyone disappointed.
* When it comes time to estimate costs, be realistic. Make sure to get input from all applicable stakeholders.
Getting input from other stakeholders and vetting suppliers and vendors can go a long way to setting a more realistic budget that can be met, even if there are unforeseen circumstances that impact costs.
You need to factor in things outside of your control, such as external environmental considerations that may impact pricing.
* You can’t effectively manage a project budget without establishing key performance indicators (KPIs).
KPIs help you ascertain how much has been spent on a project, the extent to which the project’s actual budget differs from what was planned, and so on.
Actual cost (AC), Cost variance (CV), Earned value (EV), Planned value (PV), Return on investment (ROI) are a few commonly used pronject KPIs.
* Frequent budget oversight is essential in preventing budgets from getting too far out of hand.
Your chances of keeping a project on track with frequent budget review are far greater than if you forecast once and forget about it.
Project managers should review the number of people currently working on a project and the project's future resource needs on a weekly basis. Doing so will ensure that you are fully utilising the resources you have and that you have the right resources ready for the rest of the project. Regularly revisiting the resource forecast will help keep your project budget on track.
* An important part of staying on budget is to make sure all team members are aware of the current budget status as well. Keep the project team informed of the project budget forecast. An informed team is an empowered team that takes ownership of its projects.
Courtesy: www.cio.com
