The Money Files

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

About this Blog


Recent Posts

3 Ways Processes Add Risk to Projects [Video]

3 Principles for Project Metrics

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

3 Levels of Project Quality [Infographic]

Deep Dive: Project Schedule Management: Define Activities

The Estimating Life Cycle

Categories: estimating

What are the steps for estimating?

Each business will have a slightly different approach to how to do project estimating, and your PMO will likely have a methodology that you are expected to use. For budget estimating, it maybe the corporate Finance department that sets out how estimates are supposed to be calculated.

However, back in the real world, I meet lots of project managers who don’t have the benefit of a fully-documented helpful process for how to do estimating, so in this article I’ll look at the 4 steps for working out your estimates to give you a headstart!

What is an estimate?

First, it’s worth us defining what an estimate is.

An estimate is a quantitative assessment of a likely outcome.

You will find far more detailed definitions of estimates elsewhere, I’m sure, but that does for me.

On projects you have to do quite a lot of estimating, for example:

  • For task duration
  • For task effort
  • For expenditure
  • For benefits.

Let’s look now at the 4 steps of project estimating. Again: if you have your own corporate methodology to follow, use that or you risk getting into trouble with the PMO! But in the absence of anything else, this 4-step approach is as good as any for getting the basics right.

Step 1: Plan to Estimate

The first thing to do is make a plan. As with so many project management techniques and processes, you need a clear idea of what you are supposed to be doing before you actually do it. This step is where you establish your estimating plan.

That sounds far grander than it really is. It isn’t a lot of work, and once you’ve estimated a couple of projects you’ll find you can do this step almost automatically, with very little effort.

Work out:

  • What techniques you are going to use to do the estimating (it’s also good to know why you are using those techniques so you can justify that you chose the best approach for the job)
  • Who is going to contribute to putting the estimates together.

You’ll also need any other documentation about estimating approaches or corporate or PMO standards that you have to adhere to. This all provides input into how you are going to create your estimates and helps you come up with a solid plan for how to approach the task of estimating.

Step 2: Create the Estimate

This is where you create your estimate. Basically, you use the techniques that you identified in your planning step to come up with your estimates. Work with your team to think about the resources, budget and time that you need. Use the tools you identified, and the guidance from your company to create the estimates.

I’d suggest you don’t do this by yourself, how tempting it might be. Hopefully the techniques you identified in Step 1 will recognise that it’s better to work collaboratively for estimating. Different opinions make a difference and you’ll get a better quality estimate – hopefully you chose to use techniques that take advantage of this!

Step 3: Manage Estimating

Here we manage the estimates. You’ve input your estimates into your budget or schedule and you are using them on the project.

However, you want to make sure that they are maintained and managed as the project progresses. This means you could be revising them appropriately as the team do the work, making sure they still accurately reflect what you think is needed on the project.

The most common way to do this is to compare your estimates to your actual figures as you go, and then tweak the upcoming budget figures, schedule or resource allocation appropriately to take account of what you are learning about progress on the project so far.

Step 4: Improve Estimating

This is where you apply continuous improvement principles to the way you work out your estimates. You could argue that this is an optional step – it doesn’t help you manage your current process – but I don’t think it’s too much to ask that you do this on all projects, all of the time.

You’ve learned from your experiences on this project, so take those lessons and look at how you can improve estimating on your future projects.

Calibrate your models, tweak your techniques and do any other changes necessary as a result of what you have learned on this project. This may mean you have to feed information and your experiences back to the PMO or Finance team so that they can take your feedback into account and make the required changes (or not). Still, even if you aren’t in control of the templates and models you use, it is good practice to try to help your company improve its processes where you can.

Those are the 4 high level steps for creating an estimate. See? It wasn’t so bad. Personally I think the planning stage is the hardest, because it involves thinking instead of just diving in. The rest of the process is all about using the tools you decided on and then working with them throughout the life cycle of the project.

Posted on: September 25, 2018 07:59 AM | Permalink | Comments (17)

5 Tips for Better Project Estimates [Infographic]

Categories: estimating

When estimating feels like nothing more than a best (even educated) guess, how can you improve your project results? Great – or at least effective – estimating is something that can vastly improve your stakeholders’ confidence levels, help your team plan their work better and give you more chance of hitting your budget or time targets. So why does it feel so hard?

In this infographic I share 5 tips for making estimating that little bit easier. What other advice do you have for improving the estimating process with your team? Let us know in the comments!

You can read more about some of the ideas on this infographic in this article.

Posted on: July 18, 2018 08:59 AM | Permalink | Comments (20)

What’s New in Project Cost Management (pt 2)

What’s new in Project Cost Management: Plan Cost Management Process – read the first part of this series here.

In the last article I looked at what was different about Plan Cost Management, now that the PMBOK Guide®-- Sixth Edition is out and available. Today, I want to look at what’s different in the next process: Estimate Costs.

Estimate Costs Process

The second process in this knowledge area is Estimate Costs, and it looks a little bit different in the new version. There’s nothing amazing that is going to throw you for six, but the process does feel simpler and more streamlined. It’s just more logical. That’s a good thing!

We are still in the planning process group.


The inputs have been updated and streamlined. Previously the inputs included the cost management plan, the human resource management plan and some specific documents. Now, the inputs are simply ‘project management plan’ and ‘project documents’.

You could say that this vague, but it’s more in line with other processes and knowledge areas that have been updated, and it’s more rounded. You could, for example, argue that other bits of the project management plan are important, not just those mentioned in the previous version. In fact, the guidance in the PMBOK® Guide does go on to say that the quality management plan plays a part.

Project documents is also explained to include the lessons learned register (which is popping up everywhere – also a good thing) and resource requirements. I like this new vague approach because it means you could even argue that things like the communications management plan and stakeholder management plan have a role to play – they aren’t mentioned in the PMBOK® Guide but in real life you’d want to incorporate the costs of stakeholder engagement activities and a cross-check against that plan would be helpful during your project budgeting.

Tools and Techniques

Tools and Techniques have had a revamp too. There are 3 new T&T:

Data analysis (alternatives analysis, reserve analysis and cost of quality – these last two used to be called out as inputs in their own right and now they are bundled up)

Project Management Information System (again this seems to be popping up all over the place, and is explained to mean spreadsheets, statistical analysis and simulation software (does anyone outside of large government/public sector projects actually use this?). This replaces the old ‘project management software’.

Decision making e.g. voting. I love how some of the ‘tools and techniques’ read more like leadership qualities or competences, but yes: you can use decision making to help with defining your estimates.

Vendor bid analysis and group decision making techniques have dropped out, but would be bundled into decision making.


There’s a tiny change here: Activity cost estimates becomes plain old Cost estimates.

Aside from that, there’s nothing else different about the outputs. You still get out the estimates themselves, the documentation that sets out the basis of estimates and you update some documents as required.

Next time I’ll look at what’s new in the Determine Budget process. This has had quite a few updates, although they make the process easier to understand and easier to tailor, in my view. More on this next time!

Posted on: January 23, 2018 07:59 AM | Permalink | Comments (7)

4 Reasons Why People Need Estimates

4 Reasons Why People Need Estimates

Estimating take up far too much time and are, as my 3-year old says about everything right now, ‘a bit boring’. I have no idea where he picked that up from. Don’t judge me!

I digress. We need to do estimates. And if you are one of those strange people who LOVE doing estimates, then skip this article and go and read this one instead!

Take a deep breath, and think for a moment about why we bother to do estimates. In his book, Project Management for Humans, which is soon to be released, Brett Harned provides 4 reasons why estimates are important for people on the team.

1. Estimates help you cost the project

“Estimates are based on a level of effort and times,” Brett writes. “Typically, the cost of a project is based on the time spent on a project. Your estimate helps calculate a rough determination of that cost and sometimes whether or not the project is worth the investment.”

A giant estimate normally comes with a giant price tag, and that might mean you don’t go ahead with the project. Or you scale down the scope significantly so you still get some benefit and don’t have to spend half your annual budget on this one project.

Either way, knowing how long things are going to take gives you valuable information to make informed decisions about your project and whether or not it should go ahead in the current form.

2. Estimates help you staff the project

Estimates are created around specific tasks and the skills required to complete those tasks.

Your estimate therefore gives you clues about who you need to do the work. And in turn, that gives you a good idea about how long the work will take.

For example, a senior developer might take a week to complete a task, but your apprentice developer would take a month, and need someone else working alongside them to help check the work and support them during the coding. Knowing this you can then decide what’s more important: having the work done quickly or upskilling the apprentice. Or maybe you won’t have a choice, if the skilled developer is working on something else and isn’t available.

Either way, estimating the work and thinking of who is involved in doing it will give you invaluable information for your plan.

3. Estimates help you plan dependencies

If you know how long a task will take you can better plan for the impact it is going to have on other tasks or on other projects. The duration of a task can help you schedule the next set of tasks, or tell another project manager when they’ll be able to start work on their project (or task).

For example, if you are tying up your senior developer for 4 weeks, in a business that only has one developer with those skills, the next project to use that person will have to wait until they are free. That’s a dependency on that skilled person.

You have a number of options to deal with that dependency including changing the project priorities so the other project gets the resource before you if that project is ‘more important’, buying in external skilled resource if you want to do both at the same time, or even having someone else with less ability work on it so you can at least make a start. But you need to know that you have a problem with resourcing and dependencies before you can start to come up with solutions to address it.

Here’s an introduction to dependencies and constraints on projects. Even knowing that your project doesn’t have dependencies on any other work is a big help with your planning because it frees you up to get on with things safe in the knowledge that your team isn’t messing anything up for anyone else. (Of course, that might change if a new project is approved – so don’t take it for granted.)

4. Estimating creates agreement and buy in

“Working with a team can often be a challenge, particularly when no one is in agreement on the project,” Brett writes. “Working together to produce an estimate can be a great way to pull the team together to talk about staffing, responsibilities, process, and timing. And guess what, that all helps produce a solid estimate.”

I covered this in my book too, Shortcuts to Success: Project Management in the Real World. I highly recommend that you share all your budget information with your team, from the moment you start to work on estimates through to the budget spreadsheet and forecast rates.

Working together will help you gain collective responsibility for the dates and scope of the work. You can hold each other accountable and no one can turn around and say that they weren’t aware of the deadlines or their responsibilities. That’s huge, especially on projects with tight deadlines and remote teams.

So, estimates benefit you and your team in lots of ways, and they are a part of your project to just get on with, get done and then start using. They can feel like the start of the real detailed work, the prelude to the fun part of building, but they help set you up for success and a smooth delivery. What do you feel about estimates? Let us know in the comments below!

Posted on: June 21, 2017 09:59 AM | Permalink | Comments (7)

5 Quick Estimating Tips [Video]

Categories: estimating, video

Here are 5 quick tips to help you with project estimating.

For a more in-depth look at some of these points, check out this article on project estimating.

Posted on: January 08, 2017 11:59 PM | Permalink | Comments (2)

"One man alone can be pretty dumb sometimes, but for real bona fide stupidity there ain't nothing can beat teamwork."

- Mark Twain