Categories: budget
Last time I wrote about the change of project management behaviour and skills needed as you shift from managing the early stages of a project and the latter stages, and today I want to take that a bit further.
Project budgets also fall into the category of needing to be managed differently. They can be a little – can I say it? – optimistic at the beginning of a project. Your forecast, however well put together, might end up including an element of hope or luck as well as evidence. I think this is particularly true of knowledge work or unique technologies, and perhaps less true of projects where there is an element of repeatability or reliability, so let’s go with those ‘not-done-it-before’ projects for this article.
Early in the year, the forecasts might have held water, but by the time we get to autumn in the northern hemisphere, we’re into Q4 and reality is here. This is the point where confidence needs to replace optimism.
The difference between optimism and confidence
Just so we’re all on the same page with the terms, optimism assumes things will work out. Confidence is based on evidence, learning, and updated assumptions. Stakeholders can usually sense the difference because those senior leaders who are interested in the numbers will easily be able to judge if something is off.
Sometimes, it feels like optimistic estimates hang around longer than they should, perhaps because people are reluctant to rock the boat or through fear of losing stakeholder trust (although what’s faster than losing it than leaving it too late in the year to do anything about needing more cash to deliver?) It could also happen as a result of relying on early plans that no longer reflect reality, so not through any nefarious means or insecurity, just not getting round to updating the schedules.
What to look out for
Here are some signs that optimism is driving your budget view. Watch for these and then you can start to address them to bring more confidence into your Q4 estimates and forecasts!Forecasts that stay flat despite changes
Have you changed something on the project? You updated the forecasts, right? If you didn’t, you might be carrying invisible extra work.Risks described but not costed
A long risk log but one that is completely detached from your budget is a problem. Can you work out which risks require money or time to manage and add that into the forecast?Heavy dependence on contingency without clear triggers
How healthy is your contingency fund, if you have one? Make sure there are clear guardrails on how to use it so you’re not whittling it away before the end of the year with no audit trail.Explanations that rely on future fixes rather than current evidence
You might have seen this on projects in the past – project managers saying that some other project will deliver something that they need, or that we’ll fix it when we get there.
Moving to confidence-based estimating
By this point in the year you probably have a few changes, and if you’ve incorporated those you can use them as examples of how knowledge is improving the confidence levels of your forecasts. You can start talking about what has changed since the forecast and why, giving examples, and if necessary, asking for input on decision-making before you choose a route.
This is a harder one because it puts the team under scrutiny, but you can also separate uncertainty from poor performance – call out where things changed because you didn’t know about them or are working in an unpredictable environment, in comparison to where things changed because someone did a poor quality job.
Overall, involving sponsors in trade-off discussions early helps them feel like they are both being consulted and that they are shaping the decisions. And that can help them feel like things are under control – and hence there is more confidence in the estimates.
Being realistic builds trust. Budget confidence comes from transparency and predictability, and there is still time this year to get your forecasts into good shape for year end, to avoid any December surprises.
Posted on: October 15, 2026 12:00 AM |
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