Is your project budget red?

From the The Money Files Blog
A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

About this Blog


Recent Posts

How To Deliver When Your Project Budget is Cut

5 Differences Between Project Accounting & Financial Accounting

How To Manage A Project Audit

Ask The Expert: Entrepreneurship at Work with Chris Cook

Book Review: Writing Proposals: A Handbook of What Makes Your Project Right for Funding

Categories: budget, reports

As part of your project status reporting you probably include metrics. You might even have a project dashboard that calculates the metrics from an enterprise PM tool and displays them for you. Project metrics are things like resources consumed and estimate to complete. Some metrics mean more to stakeholders than others. Personally, I am not a fan of percent complete for tasks, for example.

As least one of your project metrics should relate to your budget – assuming you have the responsibility for tracking how much the project is spending. There are a number of different ways to track the budget, for example:

  • Earned value management metrics
  • Variance to forecast
  • Percent of total budget spent
  • Budgeted estimate at completion

Again, project stakeholders will respond better to some measures than others. It depends who they are, what they want, what they need to do their jobs and what their previous experience is. A project sponsor with a finance background is likely to want a far greater degree of visibility of your budget than someone whose main focus is quality. Your job is to find out what they want and provide it.

It really doesn’t matter what the metric is that you use, provided it fulfils two criteria:

1.      It must make sense to the people who are using it

2.      It must have clear boundaries defined so that you all know what ‘red’ means.

There is no point in having Red, Amber, Green (RAG) or any other categorisation method (click here for a Gantthead discussion on how to categorise projects) if no one knows what the different categories mean.

Set thresholds. Define what the tolerance levels are for each metric and publish them. Then stick to them. Your budget RAG status could look like this:

Green: within +/-1% of budget

Amber: within +/- 5% of budget

Red: over +/-6% of budget

Choose figures that make sense to you: 1% of a £5m is not very much in the grand scheme of things so you could probably agree different tolerances with your project sponsor. As long as you are clear about what ‘Red’ means, everyone will be operating from the same information and your metrics will be meaningful.

How do you define Red?

Posted on: February 16, 2012 03:11 PM | Permalink

Comments (0)

Please login or join to subscribe to this item

Please Login/Register to leave a comment.


If trees could scream, would we be so cavalier about cutting them down? We might, if they screamed all the time, for no good reason.

- Jack Handey