The project budget is very important, it is the lifeblood of the project, it is the engine that drives the financing of your project. It informs stakeholders of the amount of money needed and when required. Project budgets are important for any industry such as construction, marketing or manufacturing, etc., and to learn how to create the core project budget successfully and effectively, we invite you to continue reading.
What is the project budget?
The project budget is the combined costs of all the activities, tasks and milestones that the project must achieve. In short, it is the total amount of money that it will need to finish the project that must be approved by all relevant stakeholders, initiates the establishment of the project budget during the project's start-up phase and continues to monitor it until the project reaches the finish line.
Large businesses can have multi-page project budgets, often associated with a large number of costs, such as labour costs, material purchase costs and operating costs. The project budget itself is considered a dynamic document, and is constantly updated throughout the project.
The project's budget preparation process includes:
Budget planning: costing and budgeting based on project estimate
Budget tracking: follow-up on project expenditure during project implementation phase
Project budget management: development of guidelines and control procedures to ensure cost overruns for project budget
Why is the project budget important?
Project implementation needs a detailed and well-defined project budget. Here are five reasons why you budget for your project:
- The project's budget is necessary to secure funding. By considering budget figures, stakeholders will know how much funding is required and when funds are needed.
- A detailed project budget is necessary to develop a good project plan, without which the project is likely to fail.
- The establishment of the project budget is essential for project management, as the budget estimates address cost constraints, and a well-planned budget is the basis for cost monitoring and control.
- The project budget allows project managers to compare actual costs with the approved budget to determine whether there is a discrepancy, which helps them to verify the project's progress and whether they need to take corrective action.
- Formulating the formal project budget helps companies to remain financially viable, if the budget is properly prepared, it will help improve the project's profitability and overall success.
How to create the core project budget in six easy steps
These six steps can help you put financial resources together and create a project budget summary:
1. Divide your project into tasks and milestones
Goals and milestones play a pivotal role, and have the greatest impact on the project budget - which is why project managers must pay much attention to this part of project budget management.
Working with your to-do list will give you an understanding of what you need to achieve and help you manage the cost of the project If you already have a to-do list, that's fine, and you can start right away, But if you don't, start creating a domain and writing everything your team needs to do, The resource management programme was used to place the project's outputs on the project schedule and establish a clear path leading to the successful completion of the project.
2. Estimate each element of the task list
Now is the time to provide an optimistic estimate for each item you have recorded when preparing the project budget, at this point, identify all the resources and materials you will need to perform well and include them in your estimate when calculating the price.
To create a core budget for the project, you need to identify the resources you will need, a comprehensive resource management plan should include information about:
- Skills and specializations that must be available in the persons required for the project.
- The amount of time that project managers think their team will need to complete all the tasks.
- Availability and capacity of resources required.
- Maximum or estimated cost of their work.
- Any material resources the team may require throughout the project.
3. Cost estimate
Make time to estimate costs for each activity, task and resource required, use historical data, industry standards, expert opinions and suppliers' offers, if necessary, to make your estimates as accurate as possible.
Include the project cost categories common in project management, such as:
Actual cost of work: Try not to use estimates, but to use the actual salaries of the employees you wish to assign to your project.
Project and company overheads: You can calculate accurate values using our cost allocation formula.
Administrative expenses.
4. Top-down rating and collection
This technology estimates the cost of the project as a whole, then the entire project is divided into smaller components and allocates part of the total budget for these components, it is generally used when a fixed budget is allocated to the project.
The downward estimate may be highly inaccurate as it is difficult to estimate the cost of the entire project without understanding its components.
As for collecting estimates, this is probably one of the easiest parts of the project budget process, especially if you have a spreadsheet with two columns: tasks and costs, after that, you will be able to calculate total speed.
5. Expert judgement
This method involves obtaining estimates from people with knowledge, skills or expertise specializing in costing and understanding the field of your project, you can hire an advisor if you do not have an in-house expert.
This technique is based on the experience and knowledge of the people who provide the estimates. Requiring a certain minimum understanding of the project's application area and environment, the accuracy of existing estimates using this technique depends entirely on the knowledge and expertise of the experts involved.
6. Add Emergency and Tax
The emergency and tax addition allows you to ensure that the project does not exceed the budget and that your estimated number is closer to the final costs you spend at the end, and if you do not know how much emergency to add, project management experts recommend getting 10% of the total.
Conclusion:
Setting a budget for the project is a fundamental skill for anyone in business, just remember that the most difficult budget for the project will be the first budget, once you master this process, your planning efforts will accelerate, and your projects will routinely reach within your budget parameters.
Topics:
FEKRAIT Software for managing your property, real estate, and rental apartments.
reference:
1. <<Stages of a project life cycle>>، bedfordviewedenvalenews
2. <<enterprise project management>>, techtarget
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