10 Proven Strategies for Developing a Project Budget
Developing a project budget can be overwhelming but with these 10 proven strategies, you will know what steps you need to take to develop a project budget without fail.
Composing a budget is a critical stage in the project management process.
To ensure that your marketing activities can be executed in their entirety, you must plan your expenditure and provision your financial resources carefully.
What is a project budget, and what should it include?
A project budget is a projection of the total amount of money it’ll cost to carry out your project to completion over a specified period of time.
To come up with this figure, you must estimate:
- the time you need to perform and complete the project
- resources that’ll be required to carry out each task.
This process usually takes place over three phases:
Cost estimation: Use historical data to gain a better understanding of what resources and how much time was required for similar projects in the past, and their related costs.
Breakdown: With clear objectives in mind, calculate and divide budgets for each aspect of the project. This will help you make the transition between strategy and operation.
Monitoring: Keep a constant track of all budgets and activities. This can be crucial, especially if you have little to no historical data to start with. Make sure you keep a thorough record of your expenses and revenue.
Evidently, any project budget, but especially one for a large project, encompasses a lot of moving parts.
Here are our proven strategies to simplify the process:
Focus and get to the core
The first step to any venture is to peel back the layers of your working day and streamline your processes. This will simplify those processes and clarify steps when creating a project budget, as well as give more time for thorough research and calculations.
Why it is important: A clear and focused workflow increases productivity and provides a solid goal—namely, an accurate project budget.
You can achieve this by:
- Removing frequent distractions
- Consolidating or delegating tasks where possible
- Establishing a fixed deadline.
Estimate an accurate budget
When estimating a project budget, we know not to underestimate it. But you might not know that overestimating a project budget can be a problem, too.
Undervaluation can cause restrictions and unfair prioritization, forcing you to miss out on crucial resources. Overvaluing a project can lead to unnecessary expenditure, wasted resources, and unhappy investors.
A rule of thumb is to make use of all the data you have and get as accurate an estimation as possible. An emergency contingency should be proportionate to risk factors, such as equipment failure. Only use the fall-back budget when necessary.
Expect, pre-empt, adjust.
Use experts for accurate insights
When creating a project budget, you need expert knowledge from each specific area, either from internal teams or external sources. This includes the production side of the project if it is being done in-house.
Ensure you understand every aspect of the project by speaking to your colleagues:
- What tasks will the particular department get?
- What resources do they need to achieve them?
- How long will research and development take?
- What resources/expertise do they already have that might save time and money?
Leverage expert knowledge to improve your understanding of what the project budget needs. Colleagues can help get a more accurate estimation of costs to include.
Remove silos between teams and enrich your project with meaningful, and cost-saving, insights.
For instance, copywriters and engineers can help with the understanding of the investment needed to reduce your website’s bounce rate.
International staff could offer in-country expertise on how much it costs to sell to that locale.
Tech-minded individuals might suggest a cost-saving alternative to the software currently in use.
Make tasks smaller and easier to manage
With so much to worry about, it’s important to break data up into smaller, more manageable sections. Separate major project phases into monthly budgets when creating your plan.
This makes the data more digestible when adding them to your project budget. There are many ways to manage time and tasks productively, and it’s important to adapt to your team’s needs.
Dividing your budget can give you a clearer view of the project. At the end of each point, you can analyze the losses and profits for a micro view of the larger project budget.
This will come in handy when looking back at the project and contributing to historic data. Estimating for the next project budget will be more accurate with this information.
Diversify funding sources
Diversifying isn’t just for the investment side. Another aspect of developing a project budget is the funding itself and where it comes from. Investors need reassurance that the whole project doesn't rest on them.
Having different sources of funding can help ease their worries, spreading the load. This might seem like a recipe for disaster; too many chefs in the kitchen. So you must establish a clear aim and strict boundaries.
A mixture of public, private, and self-financing options can strengthen your project budget. Diversify the money, communicate and keep investors on board and relaxed, even excited.
Keep track of each of these in your project budget. It will not only be simpler to adjust and understand, but it will also be easier to report on.
Understand your colleagues’ roles
Communication with your colleagues makes their roles, skills, and resources a lot clearer, especially as many people are working remotely nowadays.
Internal communication can gain you insights into workloads, schedule availability, an understanding of what is required for each facet of your project, and how that impacts the budget development.
Problems with efficiency could be due to something deeper. Use this potential to help develop the project budget with a more rounded understanding.
Identify and optimize timelines
Delays and extensions can be frustrating. But if the project budget includes them from the beginning, they’re less of a problem.
Underestimating how long a task will take can have a domino effect on the project, so be critical.
People tend to be optimistic about their abilities when speaking to management. It’s good practice to add at least 20% of time onto their initial workload estimation for each task. People are human, after all.
Solutions for Enterprise Resource Planning (ERP), either a cloud or on-premise, can help to maximize your staffs’ productivity and minimize timeframes.
Monitor the process to keep track of project budget
Figure out how best to track your project budget to better understand the process.
Spreadsheets are great but should be set up by someone with accounting experience. Factor in every type of expense needed, and understand what each section needs.
Spreadsheets, especially off-line ones, can stagnate if not maintained. One small lapse in updating and the whole thing gets thrown off-kilter.
Utilizing project budgeting software means taking a more productive approach as it can improve accuracy, time management, and reliability.
Tracking people’s productivity is paramount to understanding a project budget. An integrated system will keep everything together. With solutions like TMetric you don't miss a thing, and it is vital.
Keeping a thorough record of every step is necessary for looking back at a project’s success, and failure. Every project is unique, and so your project budget tracking system should be too.
Analyze previous projects
As stated, historical data can be integral to project budget development. Look at the records of similar projects to understand what to include. When considering and fighting potential fires in your project, learn from previous failings and drawbacks for an advantage.
Consider these factors when looking at old lessons:
- Was it a win or a loss?
- What happened?
- What was the impact?
- How does this change future projects?
- What were the actions?
Understanding mistakes, yours or otherwise, is always a step in the right direction.
If you are lacking in reference material, speak to experienced people. Find out what they learned from similar projects, and do your research.
Learn from the changes
Just as you can learn from past projects, you can also learn in real time. The budget you establish is the baseline for the whole project.
If this baseline wavers at any point or dips or spikes as the project progresses, it’s a sign of change. You can analyze this to identify and solve potential problems.
Keeping track of budgetary changes is important. The data will be useful for future endeavors, as well as reporting back to investors on progress.
Hence, productivity software with project budgeting functionality can help you establish this baseline. And make it easy to re-establish after adjustments.
Developing a project budget can be intimidating, especially if it’s a new concept. A thorough understanding of your project can make the job easier. Small adjustments can make all the difference.
Above, we list 10 strategies you can build for successful project budgeting. It is also worth considering that the success of the project budgeting heavily relies on solutions that save time, money, and improve interactions with customers.
Deploying the solutions relevant to your business niche can help in making everything more manageable.
About the Author
John Allen is the Director of SEO for 8x8, a leading call center technology and communication platform with integrated contact center, voice, video, and chat functionality.
John is a marketing professional with over 14 years of experience in the field, and an extensive background in building and optimizing digital marketing programs across SEM, SEO, and a myriad of services.