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Alignment of annual corporate budget vs. project budgets

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Svenja Merle Kassel, Germany
Combining annual corporate budget planning with project-specific budget approvals is quite complex. 
How do you ensure alignment of both the annual corporate budget process and individual project budget approvals?
How are approved project budgets included in annual corporate budget?
How do newly approved project budgets integrate into corporate annual budget?
How do you manage the interface between corporate controlling and PMO/project managers?
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Kiron Bondale Retired | Mentor| Retired Welland, Ontario, Canada
Svenja -

The reality is that annual budgeting is a legacy holdover from earlier, less dynamic days and ongoing budgeting (quarterly or monthly) is a better option.

If there is no way to move to that, then the common approach is to have rough order of magnitude cost estimates approved as part of the annual budget and when a project is ready to start and a more accurate estimate is derived, that is compared against the original approved placeholder and depending on the degree of variation, it is either able to proceed or a game of "robbing Peter to pay Paul" emerges...

Kiron
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1 reply by Svenja Merle
Oct 16, 2024 7:25 AM
Svenja Merle
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Absolutely my thought!
In my organization I see the different views on the topic very much. We do approve on an annual basis general cost estimates and once projects emerge they are verified against those cost estimates. But they may also torpedo them...
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Sergio Luis Conte Helping to create solutions for everyone| Worldwide based Organizations Buenos Aires, Argentina
The key, from long time ago, is thinking about solutions instead thinking about projects. That´s will help in the process to assign money and to control how the money is spending. What today is called OKRs helps a lot on it. In the last 20 years I mostly used lean portfolio management process with okrs and most recentrly (10 years aprox) I used it inside SAFe model which in my opinion can be taken as a good example for budgeting and solution founding assignement. I am not saying to use SAFe. It will depends on lot of things to be analyzed first. I am just saying is a good example, just my opinion.
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Svenja Merle Kassel, Germany
Oct 09, 2024 7:39 AM
Replying to Kiron Bondale
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Svenja -

The reality is that annual budgeting is a legacy holdover from earlier, less dynamic days and ongoing budgeting (quarterly or monthly) is a better option.

If there is no way to move to that, then the common approach is to have rough order of magnitude cost estimates approved as part of the annual budget and when a project is ready to start and a more accurate estimate is derived, that is compared against the original approved placeholder and depending on the degree of variation, it is either able to proceed or a game of "robbing Peter to pay Paul" emerges...

Kiron
Absolutely my thought!
In my organization I see the different views on the topic very much. We do approve on an annual basis general cost estimates and once projects emerge they are verified against those cost estimates. But they may also torpedo them...
avatar
Francisco Matheus Chagas
Community Champion
Project & PMO Manager | Research & Enterprise Mentor| GFB Holding South America, Brazil
The integration of annual corporate budget planning with project-specific budget approvals is indeed a complex process. However, by following a structured approach based on clear governance, strategic alignment, and performance metrics, organizations can effectively manage this complexity. Here's how to address the key aspects of this challenge:

1) Establish Clear KPIs and Governance Standards
First and foremost, it's crucial to establish and widely communicate clear Key Performance Indicators (KPIs) and governance standards across the organization.
2) Align with Organizational Roadmap and Strategy
The organization's roadmap, aligned with its strategic objectives, serves as a guiding light for both corporate and project budgeting.
3) Require Business Cases for All Projects
Mandating business cases for all projects is a critical step in ensuring alignment between corporate and project budgets.
4) Align Organizational KPIs with Project Business Cases and OPIs
Ensuring that organizational KPIs are clearly aligned with project business cases and Organizational Performance Indicators (OPIs) creates a cohesive framework for budget planning and approval.

By implementing these strategies and focusing on clear governance, strategic alignment, comprehensive business cases, and aligned performance indicators, organizations can effectively bridge the gap between corporate budget planning and project-specific budget approvals. This approach ensures that projects are not only aligned with organizational strategy but also integrated seamlessly into the overall financial planning process

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