The Money Files

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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 GirlsGuideToPM.com.

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How to Ask for a Budget Increase

Categories: budget

It happens: your project budget won’t quite stretch to the full amount you are forecasting that’s required to complete the work.

But when you do have to ask for more money, how should you go about it? The conversation with your manager or sponsor can feel a bit awkward.

Here are the steps to take to ask for a budget increase (and get it).

1. Clarify why you want the extra

You’ll have to justify why you want the extra funding. Be clear about what it’s for and what has changed since your first project budget was put together. You might have a very good reason, such as a change to the project that has been approved – but is going to cost more.

Unfortunately, it’s often the case that the estimating wasn’t that great the first time round, so you simply got it wrong and need more budget to cover the existing work. Just be honest.

2. Define how much you want

So you know you need more. But how much more exactly?

Do your sums. If your estimating wasn’t up to much last time, use a different method for calculating what you need this time. Learn from your mistakes. Use your subject matter experts to help. Add contingency. Basically, get it right.

I know that’s tough, but take your time and get really clear on what additional funding you are asking for. This is important because it’s embarrassing to have to go back and ask for extra funds a second (or third or subsequent) time. If you’re going to have to ask for more money to deliver the project, let’s ask just the one time.

3. Put together a justification or options

You know what you need and you know why you need it. But so far, we haven’t explained that to anyone. Get your story clear. Justify why the additional funding is required.

If you are able to present options, do so. For example:

  • If we want to deliver the additional functionality identified by the focus group during user testing, we will need an extra $12k.
  • If we want to also address the security issue that was flagged by the IT testing during penetration testing, that will cost an additional $4k.

You’re presenting a menu of options for your project sponsor to choose from. They can choose to go forward with all of them, and will need to find the full allocation of funding you have asked for. Or they could pick and mix from the list, focusing on the changes and additional work that they feel will be most valuable for the project.

4. Talk to your sponsor

With that information in hand, it’s time to talk to your sponsor. Arrange a time when you’ll have the opportunity to discuss the options.

The conversation will be a mixture of presenting to an executive and also a general chat about the project. Be prepared to talk them through your justification, getting straight to the detail, but also for them to derail the conversation by talking about other aspects of the project that concern them. Make sure you get enough time talking about the funding issue.

They might not be in a position to make a decision straight away about how much additional funding you can have and for what. If there is a time-critical element to their decision making, let them know. For example, you might only be able to secure a special discount on a product until the end of the financial year, or something like that.

Be clear that you need them to make a decision.

5. Act on the decision

You’ve got the decision. You can either have the funding (hurray!) or not. Either way, you can now take steps to work on that basis. If you can increase your project budget, change your budget numbers (and record that the change was approved).

If you have been told that you can’t have the extra funding, you need to go back to the drawing board and review what you can achieve with your project. Maybe you need to deliver over a longer period of time, or release resources, or review what you can realistically complete with the money you have.

What tips do you have for requesting additional funding on a project? Let us know in the comments below!

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Posted on: May 01, 2019 02:04 PM | Permalink | Comments (7)

5 Spreadsheet Tips to Improve Your Workflow

Categories: budget, workflow

What spreadsheet package do you use? Personally I use Microsoft Excel, although I do have Numbers on my iPad I case I need to look at a spreadsheet while I’m out and about. I sometimes use Google Sheets for personal projects as well, but I’m not massively comfortable with it.

Regardless of what tool you use, spreadsheets are a huge part of life as a project manager. Whether you are exporting data from an enterprise project management tool, creating a budget forecast or using filterable lists as a way to manage tasks, risks or issues, spreadsheets have so many uses in project management.

Here are some tips to make using spreadsheets easier – all tried and tested by me and colleagues over the years!

1. Add Notes and Comments

Add notes to your spreadsheet so you know how the formulae work and what estimates were based on.

You can do this by adding a separate tab to record notes, if there are a lot of them. I record the way I formulated an estimate for the budget, and what the figure includes, plus any assumptions around resource time and so on.

For short notes, I add them as a comment on the relevant cell. This is the easiest way to note when a cell was updated, or to record what was in the cell before you changed the estimate to be something else.

2. Add Version Control

Learn how to do version control on your documents (where version control is not added automatically by your software). Then add a tab to the spreadsheet showing a table with version control numbers.

When version controlling a spreadsheet, don’t try to add an incremental version number every time you update something. That would be time consuming and not add any value. Instead, do a major version update every time something substantial changes, such as changing major formulae or rebaselining. You’ll get a feel for when it’s important to create a new version.

3. Freeze the Top Panes

Project management spreadsheets can get quite large. In Excel you can freeze the top and side rows so that you can scroll through the spreadsheet and the headers stay in place. It makes reading and moving around a big spreadsheet much easier because you don’t lose the column and row descriptors.

4. Lock Cells

Use the functionality of your software package to lock cells that you don’t want other people to update. For example, in a status tracking spreadsheet, you might have cells that you need to have populated with ‘Open, Closed, On Hold’ etc.

You can fix the spreadsheet so that only those options are permitted. You can also lock cells so they can’t be changed, which is helpful if you have a form and you only want to allow people to enter information in certain places.

5. Add Conditional Formatting

Conditional formatting means the cell colour (or whatever section you choose) updates based on a rule. For example, if the contents of the cell is a number less than 50%, make the cell turn red. This is achieved using a red background fill. You can change the text colour, or use other formatting rules.

This is helpful when you have a large data set and you want to instantly draw people’s attention to figures that are outside the acceptable norms. You can colour code information as red, amber and green by setting up conditional logic once, and adding that formatting.

What tips do you have for making it easier to use spreadsheets? Share your best advice in the comments below!

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Posted on: April 16, 2019 09:00 AM | Permalink | Comments (9)

The Difference Between Regulations and Standards

Categories: budget, quality, scheduling

When you’re planning how to deliver quality results, and what needs to go into your project schedule, it’s worth looking at what regulations and standards you need to adhere to.

In this article we’ll look at the difference between regulations and standards and what that means to you managing a project.

What is a regulation?

A regulation is a requirement for your project. You have to follow regulations.

Regulations include applicable laws.

For example, there are a range of regulations that can influence the way you approach your project and what you can and cannot do. Here are some areas affected by regulation:

  • Breaks for workers and time away from their job e.g. for lorry drivers
  • Overtime hours
  • Maternity, paternity, family, sickness and medical leave
  • Health and safety
  • Data protection
  • Reporting e.g. for accidents or spillage of controlled substances.

Laws vary between countries, so check what is applicable to where you are based. Also note that in multinational projects, the laws and regulations might differ for people on your teams in different locations.

What is a standard?

A standard is a guideline. Your project should follow guidelines because they are there for a reason, but if you can justify why you need to approach something in a different way, then you don’t have to follow the standard.

For example, it might be the standard that no one in your office works on a bank (public) holiday. Let’s say it is normal for the office to close over the end of year period when many colleagues are celebrating Christmas. However, your project is to upgrade the telephony switches. Knowing that the call volumes will be low and no one will be around to answer calls anyway, you might decide that the Christmas period is the perfect time to do that project work. It’s not standard, but it’s the most appropriate solution for your project and least disruptive for the business.

Not all standards or regulations are going to affect every project. It’s important to have a view as to what is important for this project. It is something I would consider and resolve as part of project initiation, so that I can go into project planning with all the information needed.

How do standards and regulations affect projects?

Standards and regulations affect projects in a number of ways.

1. By affecting project scheduling

Any time legal compliance is required, you can bet you need to add extra time to the schedule to have the legal team check out what you are doing and ensure the project is ticking all the boxes. Build in enough time for regulation-related checks and work.

Equally, with resource-related regulations, you may have to constrain working time which will have an implication for the schedule. For example, you may not be able to use overtime hours, or you might have to factor in travel time to your schedule if your resources aren’t permitted to go over a certain amount of travel before taking a break.

Some of these constraints could be legislation affecting workers, others might be the way your company operates (or as PMI would define them, enterprise environmental factors). An example would be dictating that the standard working week is 40 hours. You would take that data and ensure your schedule reflects a 40-hour standard working week.

2. By affecting project quality

If you have to follow regulations or stick to standards, this could have an implication for project quality. You might have to do additional quality checks, or use particular materials. An example would be building control. In the UK, you need building control to sign off on construction work. You can’t simply carry on building or assume everything will be OK without having someone come round and inspect the site. That’s an external quality check you have to consider and plan for.

3. By affecting project budgets

If your project needs a building control check, you have to pay for that. The building controller will charge you for his or her time. That cost needs to go into your project budget forecast. Depending on what regulations and standards you have to abide by, your project costs will need to accommodate the related charges.

Once you understand the standards and regulations that affect your project, and how they are likely to affect the project, you are able to plan for them. Some might need mitigating factors and adding to the risk register. Others will be easy to manage, perhaps by adding a little extra time or an additional task to the schedule.

Do a bit of research at the start of your project and then incorporate what you need to so that your project, and your organisation, stay compliant with the relevant regulations and standards.

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Posted on: April 10, 2019 09:00 AM | Permalink | Comments (10)

Your First Project Budget: What You Should Know

Categories: budget

So you’ve been given a project with a budget? Or you’ve been asked to create a project budget for the first time? Here’s what you should know.

The expected total

Even if you’ve been told to create a budget from scratch, the person who asked (your project sponsor) already has an idea in mind for what the “right” number is. Save yourself some time and ask them to tell you what their expectations are for the final figure.

Now you have to work out how close you can get to that number.

Breaking down the cost elements

You need to work out how much each individual element of the project is going to cost. This is called bottom up estimating.

Take your list of items and estimate a cost for each one. Involve any subject matter experts in this and make sure that you take into account any constraints and assumptions. The aim is to get a detailed and accurate (albeit estimated) take on how much each element costs.

Add the individual estimates together, and that’s your total expected spend. Hopefully, this matches the initial expectations of your manager or project sponsor.

Review against expectations

Once you’ve done some work on the budget, you’ll have an idea of whether you can hit the target they have in mind. If it looks like you’ll need more than that, you can start to position the scope of the project in a way that helps you get closer to the number. Here are some suggestions:

  • Take scope items out
  • Propose a Phase 2 so that extra funding can be secured later for additional features
  • Reduce the resource requirements so you use cheaper resources, and accept that this might mean the project takes longer.

Or, of course, you could build a robust defence for why your project is going to cost more than your sponsor originally expected! Use data and facts to create the justification.

Next, you should talk to your sponsor about the other budget areas that should be considered before the budget is considered final.

Add management reserves and contingency

You can find out more about management reserves and contingency in this article, including how they fit into your overall budget.

Talk to your project sponsor about making sure there is adequate contingency for the project, and management reserves as required.

Add a risk management fund

If your project is relatively large and likely to be affected by significant risk, then it’s worth building in a risk management fund (more details on that here).

Basically, a risk management fund helps you pay for the activities required to mitigate, transfer or otherwise deal with risks. Instead of just tracking the risks, you can actually do something useful with your pot of money to offset the impact they might have on the project.

Set tolerances

Finally, talk to your sponsor about budget tolerances. That basically means the boundaries within which you can act without going to them for further approval. On a budget of £1m, you don’t want to be asking them for sign off because you need to spend an extra £10. Set some limits with which you are both comfortable and that give you freedom of action but ensure some rigour.

Note: tolerances in this instance specifically relate to financial boundaries, but the concept of tolerance is useful for other areas of project management too, like setting boundaries for schedule and risk. Tolerances provide you with guidance around how you can act without escalating.

Finally…

With all the calculations and discussions out of the way, you should be at a point now to agree the final budget. This figure is what you will work to and track against during the life cycle of the project. It’s the figure approved for your project, and you’re responsible for using the money wisely.

Report spending to the project board or steering committee and make sure you keep your numbers up to date. If you need help with tracking spend in a way that is considered appropriate by your company, start with the PMO. They probably have software or spreadsheets you can use to store all the financial figures. If you’re lucky, it might automatically create the information required for your financial reporting too!

Want more tips on creating a budget? Read this next: 5 Ways to Create a Budget

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Posted on: March 26, 2019 08:00 AM | Permalink | Comments (12)

10 Things You Should Have Done Last Year on Your Project Budget

Categories: budget

It’s January: the time that we reflect on past achievements and future goals. So let’s take a moment to look back at how you did at work with your approaches to project cost management.

I know, I know… you followed your team’s methodology to the letter and did All The Things. But really – did you? I know that for me, with all the deadlines to hit and meetings, reports to prep and executives with unrealistic expectations… I didn’t do everything as well as I would have liked.

Let’s be a little bit honest here. Below, I’ve listed 10 things that you should be able to say that you did during 2018 that relate to how you should have handled your project finances. How many of these can you confidently say you did to the best of your ability?

1.I managed my project budget

It might seem odd to include this, but I still hear from project managers on an alarmingly regular basis, who say they don’t have any oversight or influence into the project budget. The financials are handled by other people. They only have to track and manage the project tasks.

This is wrong. So wrong, on so many levels. This attitude by management that implies project managers are not “good enough” to manage financial information undermines what we should be doing with the profession.

You should have access to the financial information relating to your project and you should be the person handling project finances. If you don’t do it personally, that could be because someone else in the project team does it, for example, if you are a project administrator and the project manager does it. Or you are the project manager and you have a project financial admin person on secondment from Finance who handles the tracking for you.

It should be someone on the immediate project team who you can talk to and who will tell you the truth about the numbers.

2.I set a project budget baseline

Did you set a baseline for project costs? A baseline is a snapshot in time that shows you the total of your project financials at a certain point.
You can see what should be included in your project budget in this article. All those items, added together, give you the total project budget. But they change over time. The baseline is a record of what your budget was at a given point.

It’s useful because you can use it to check how close you are to your original plans for spending.

3.I agreed a contingency amount with my sponsor

If you started a new project at some point in 2018, you should have had a conversation about contingency.

This is added to your budget (it’s part of your cost baseline). It’s a little cushion for emergencies, the amount of which you can make up based on your best guess or a standard % measure, or you can work it out more scientifically by looking at risks and calculating amount required to adequately address them.

Read more about the difference between management reserves and contingency reserves.

4.I tracked time

Project management time spent is an overhead for your project. You can work out the amount of time spent doing the managing if you track your time (as well as your team members). It’s tempting to log everything to a bucket task called ‘project management’ and book yourself at 100%. But that wouldn’t be accurate.

Try to track your own time a bit more realistically, splitting it down by work package, project stage, type of activity or something else.

It’s helpful to know how much effort it took to get a project off the ground, especially when you come to review benefits later. You can also include this information in the business case for future projects. It can help you better estimate the amount of management time required.

5.I celebrated success with my team

Hopefully you had something you could celebrate in 2018. And celebrating can be done on the cheap (read more about how to motivate your team with spending anything). But it’s nice to be able to reward your team with something that does cost money, however small.

Perhaps you took them out to lunch and the project paid. Or there was a launch event or something. Putting a small amount of money aside for celebrations is definitely a good thing.

6. I estimated accurately

Did you follow the estimating lifecycle?

While I’ve said in the title here: “I estimated…” I don’t actually mean you personally. I mean that you involved the right subject matter experts to get decent estimates. I mean that you used solid, robust estimating techniques to make good choices about how much your tasks were going to cost.

I hope you got support from your colleagues and created a budget built on estimates you could rely on.

7. I applied good governance

Governance for project budgets means you got approval to make changes, you understood and sought approval for spending management reserves and contingency funds as appropriate and you generally had good housekeeping for your financial records. Any changes that were made would most likely have downstream implications for other project documents, so hopefully you kept those up to date too.

8. I included financial data in project reports

Good governance can also cover proper reporting to your project board or steering committee.

I frequently talk to project managers who don’t put financial information into their project reports. I get it – it’s time consuming to update your financials (at least for me; we are between project management tools and have reverted to spreadsheets for budget management for now). But really, what exec isn’t interested in how much the project has spent to date and is forecasting to spend by completion?

Project financial information really should be in your monthly reports.

9. I worked with suppliers in a positive way

Hopefully, 2018 was not full of supplier disputes for you. Perhaps you formally closed some contracts. Perhaps you worked with your procurement teams to bring on board new suppliers. Perhaps there was a supplier selection exercise that you facilitated on behalf of your project customer.

There are lots of ways to work with suppliers – with any luck you built some positive working relationships that will carry you forward into 2019.

10. I had a risk budget and managed it

Risk budgets are a particular challenge for me. I don’t often have the luxury of time to properly work out what risk management actions should be taken and allocate the funding – at least not before we dive straight into the delivery.

However, if you can, calculating the risk budget is definitely worthwhile.

Can you say you hit all the points? And are you going to hit them again during 2019?

If some of these things weren’t on your personal achievements list, then that could be because they aren’t activities relevant to the role you are in, and that’s fine. However, I’d argue that most project managers should be able to say they did all of these. What else would you add? Let me know in the comments below!

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Posted on: January 29, 2019 09:00 AM | Permalink | Comments (9)
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