How to Create a Project Budget Step-by-Step [Infographic]
From the The Money Files Blog
by Elizabeth Harrin
A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts.
Written by Elizabeth Harrin from RebelsGuideToPM.com.
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Project budgeting seems to be a topic that worries project managers more than any other. Perhaps it’s because people don’t feel comfortable doing it, as many project managers actually don’t have responsibility for the finances. It very much depends on your organisation and their processes, and the kinds of projects you are managing.
For example, I frequently mentor people and hear them say that they don’t have responsibility for project finances. And when I teach project management, the Project Financial Management lesson is the one we always get through the fastest as people don’t seem to have much practical use for it.
This is wrong. Project managers should have responsibility for the finances. How can you monitor and control the work and make the right decisions if you don’t see the numbers?
Having said that, I know that I’ve worked on projects where the cost has been internal resource only, and we haven’t had a budget, let alone the need to track external spend.
If you are in that situation, I would suggest that you volunteer to track hours spent (for ‘resource-only projects) or that you offer to take on the tracking of the budget even if you can’t wrestle away control of the actual purse from someone else. Then at least you’ll be starting to gain experience and show that people in your organization can be responsible for handing the money.
Here’s how I would go about creating a project budget. First, make sure you have a grasp of how much the sponsor is prepared to pay. Have you already heard them say it’s important to keep costs down or do things cheaply to save cost? Then you know you’ll need to manage the budget and estimate accordingly.
Then work through the steps in the infographic below.
You guys always have such helpful feedback on my images. What do you think I’ve forgotten from this one? What else do you do when setting up a project budget for the first time? Let me know in the comments!
Posted on: July 21, 2021 08:00 AM |
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Comments (15)
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Very great and objective content! Loved the image.
Jaleel .
PMP, Associate Director| MetricStream
Bangalore, India
Hi Elizabeth, thanks for article. It's simple and clear. Somehow I'm stuck with resource-only projects. Can you please elaborate what you mean by it. Another question I have is related with projects where no budget is defined or called out, at least to the program or project manager . This is exactly what I currently work on. I work on a project that develops platform / framework software under R&D vertical. So, our KPI is only schedule with releasing the framework for adoption by applications built on top of the framework. How to consider budget for such kind of projects
Thank you Elizabeth, the content was clear, concise and propose great value.
Kwiyuh Michael Wepngong
Community Champion
Financial Management Specialist | US Peace Corps
Yaounde, Centre, Cameroon
Wow, thanks Elizabeth,
Very easy to understand model...
John Watson Jr.
Strategic Planning Lead| Creative Business Solutions, Inc.
Stafford, Va, United States
Thank you for sharing this. I am typically involved in projects that are internal resources, so this was a great barebones explanation of how to go about budgeting.
PJ Darling
Community Projects Manager| Carbon Positive Australia
Australia
Super helpful infographic thank you - and so simple!
SHAKEEL AHMED
Deputy Director| Excise Taxation and Narcotics Control - Govt of Sindh
Sd, Pakistan
That is the most simple and precise way of looking at the project budget plan, although there are complexities in different factors that are not foreseeable specially in Covid days where uncertainty rules. Very good depiction.
Crisp and clear infographic with the appropriate level of detail.
Rob Mason
PM III| CTC
Odessa, Fl, United States
Nicely done. And a great graphic for visual learners. Thanks a bunch!
Thanks Elizabeth. Nice process flow. Easy to understand. I have yet to come across a client who is willing to reduce scope because we tell him that the money you are will to spend cannot deliver all of the scope. As consultants we are often asked to sharpen the pencil.
OBrien Rolle
Contractor| Rolle's Construction/ Maintenance & Property Manag
Bahamas
Thank you Elizabeth! Great Project Budget, short and simple, keep up the good works.
DRAGOS DIMA
Informatic Systems Engineer , Service Delivery manager IBM| QUALITANCE QBS ROMANIA. IBM contractor
Bucharest, Romania, Romania
@Jaleel "Somehow I'm stuck with resource-only projects. Can you please elaborate what you mean by it."
I mean projects where the only expense is people's time. For example, a process improvement. You hold some workshops, draw some diagrams and then make process changes, but there is no software to buy or expenditure beyond the time it takes to have the people do the work.
"Another question I have is related with projects where no budget is defined or called out."
On the project you mention, if the sponsor isn't worried about tracking time or having a budget, then you don't have to worry about it. I would ask if there is a budget - just in case there is and you just haven't been told about it (that's happened to me) - but if there isn't, just carry on meeting your objectives to the best of your ability.
"Best practice" project management should be to have a budget because otherwise how can you prioritise projects in the portfolio and ensure internal resource time is being spent on the most appropriate initiatives? But that's a problem that has to be dealt with at a department level, or above, as project management maturity evolves.
@Nishkar. Yes, somehow people think consultants have magical powers ;)
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