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Project management: 5 tips for managing your project budget

Moira Alexander | Aug. 17, 2017
Budget overruns are a project manager’s nightmare. These budget management strategies will keep your project budget under control — and your stakeholders happy

A project left to run without budget management and re-forecasting will lead to failure. Frequent budget oversight is essential in preventing budgets from getting too far out of hand. A 10 percent budget overrun is far easier to correct than a 50 percent overrun, and if you don’t keep an eye on your budget and re-forecast, that 10 percent overrun can turn into a 50 percent overrun before you know it. Your chances of keeping a project on track with frequent budget review are far greater than if you forecast once and forget about it.

Just as a project’s budget needs to be constantly revisited to keep it on track, so too do the project’s resource usage, since the people working on a project contribute to its cost. 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're fully utilizing 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. Scope creep is one of the leading causes of project overruns. As unplanned work finds its way into your project, billable hours mount and the project budget can get out of control.

Project managers must carefully manage scope by creating change orders for work that isn't covered by the project's initial requirements. Change orders authorise additional funding for the project to cover the cost of extra work and thus keep the project aligned with its new budget.

Keep everyone informed and accountable

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. By keeping the team informed of the budget status, they will be more likely to watch their project charges and far less likely to charge extra “gray area” hours to your project — hours they know they worked but weren’t clear about what they were working on.

The project budget must be a living part of your projects — something you review with your team and stakeholders on a regular basis. 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.

 

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