Project Management

Changes to Your Budget

Susan Snedaker

Flawed estimates, accounting anomalies and permanent or minor variances can cause budget issues. Some you just have to deal with, and get the rest of the work done with less. But many can be managed. By defining acceptable variances and monitoring your reserves, you can keep most projects on course.

A project budget is managed first by creating realistic estimates for the cost of the project (not necessarily the estimates your boss wants to hear). Once the initial budget and reserve amount are decided upon, a baseline should be established. Monitoring the cost of each task and the total, cumulative cost of the project regularly is the key to keeping project costs under control.
Whether you use percent complete, variance, or other techniques to analyze where you are with your project budget, if the project budget starts getting off track, you’ll need to start rearranging things to stay on track. Remember, though, that you should keep a flexibility grid in mind as you decide what to do. If budget is your least flexible item, you may have to push your schedule out so you incur fewer costs in a given period of time or so you incur fewer costs overall. You may also have to go back to the planning stage to determine how you can accomplish the remaining work for less.
Budget issues stem from four types of problems: flawed estimates, accounting …

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