Home » Cost » Get The Project Budget Right!

“At the simple end of the spectrum, you estimate the costs of the items you know about, take an educated guess about what you don’t know, add the two, and that’s your budget. … At the other end of the spectrum, you cost out every possible item.  Business units scramble to make up some list of initiatives ….”  InformationWeek, “Making the Most Of A Flawed Budget Process.”

This November 2010 article was an insightful summary of what I’ve experienced in my career at costing out a project.  Most of my career has been in resuscitating organizations and projects or otherwise turning them from poor or mediocre to good or even exceptional. Getting the budget right is one of those necessary steps in setting up an organization, team or project.  I will observe that getting the budget right has never been one of the core or key steps to getting an organization or project back on track.  Instead, a good budget was often the output of fixing other parts of the project such as effective project planning and accurately estimating schedules.  Accurate costs then flowed out of these activities — when they were finally done well.

Get The Project Management Budget RightWe generally know what a good budget or even a good budgeting process looks like.  The trick is to take what we already have and step it up to something that works well.  In many cases we need to fix our budgeting approach, now, while the organization may be working towards fixing it in the long run .

What has worked surprisingly well for me over the years is a very simple method.  Let me illustrate with a real experience.

I was the new director of software development.  I made a simple request. I asked finance for my budget.  It struck me as strange that the finance director had to go get “approval” to show me my budget.  When it did finally appear, it was a stack of paper, mostly with white space, listing categories codes and expenditures in each category.  Note, I had no idea what each category code meant, I was new after all.  While this list attempted to provide me with detail of my departments and project expenditures, it didn’t show me what was budgeted.  Again strangely, finance could not provide me with the planning documents.  Yes, this was an organization that was struggling with a lot of problems, including managing their budgets.  I once joked that the directors were going to pool their pocket change and buy Quicken to manage our finances.  The finance director showed clear distress at this, obviously unsuccessful, joke.

Since I had no budget plan, I found myself just authorizing and signing for things we needed or had already ordered.  This felt strange to me,  operating without knowing my budget, but my boss — the CIO — had no problem with me just doing this.  I did keep detailed records of everything I signed for.  Again, one would assume that the organization would do this, but in this case, I decided not to take the chance.  This simple habit of keeping track of my department’s expenditures over the year became an advantage when budgeting season was upon us.  I not only could check the data given to me by finance (between the two of us, we had a very complete record – either of us alone did not have all the details) but also I did not need to wait to get my data before drafting my budget. When I later moved on to a new job, my boss – now the general manager of the site – said he would miss how organized and data driven I was in managing my projects and budgets.

This technique of personally tracking key data works well in many circumstances in project management.  The purpose is not to replace existing systems or tools that should do this for us, but instead it helps us as managers to internalize the numbers and truly have a feel for them at the gut level.  After doing this for a few cycles of the process, we need not continue to do it, but we now understand better the performance of our tracking systems and can quickly see the difference between what is normal and what is a real problem.

Getting the budget right for a department or a project is an important step in every successful effort.  Sometimes we just need to step back and employ basic tracking techniques to ensure we get the data right and to help us be confident that we understand — warts and all — what the automated project management tools and processes are really giving us.

What techniques for creating a successful budget have worked for you?

Thank you for sharing. Sharing and comments tells me which articles are most helpful to my readers:
Facebook facebook   Twitter twitter   Linkedin linkedin   Tumblr tumblr   Pinterest pinterest   Stumbleupon stumbleupon   Reddit reddit   Email email  

2 thoughts on “Get The Project Budget Right!

  1. Aly says:

    Hi Bruce – I work for a risk software company here in Houston and our goal with our products is to help departments get not only the budget right but the schedule right for their projects. Project budgets and schedules are like road maps, its much easier to find your way with them than without.

    Anyways, thanks for sharing!

    1. Aly,

      Absolutely. When the schedule and budget are right, the project proceeds so much smoother and we have that much less crisis management to keep things on track. As the article indicates, my experience is that when we get the plans (schedules, requirements, etc) right then often the budget just flows right out of that. If these parameters are right (i.e., in the right ballpark, not necessarily perfect) then the budget is also in the right ballpark.

      Thanks for commenting.
      Bruce

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *
Email *
Website