Defining the Budget
Question 5: Have you defined a detailed project budget?
Good Practice: All costs should be defined in the form of a project budget. This should be signed off by the Steering Committee or other authority to ensure that sufficient funds are made available. Your budget should include all external costs such as licences, third parties, consultants, consumables etc.
A few basic rules will help ensure that an accurate and realistic budget is produced:
- Assume that resources will only be productive for 80 percent of their time.
- Resources working on multiple projects take longer to complete tasks because of time lost switching between them.
- People are generally optimistic and often underestimate how long tasks will take.
- Make use of other people's experiences and your own.
- Obtain an expert view.
- Include management time in any estimate.
- Always build in contingency for problem solving, meetings and other unexpected events.
- Cost each task in the Work Breakdown Structure to arrive at a total, rather than trying to cost the project as a whole.
- Agree a tolerance with your customer for additional work that is not yet defined.
- Communicate any assumptions, exclusions or constraints you have to your customer.
- Provide regular budget statements to your customer, copying your team, so that they are always aware of the current position.
Common Mistakes
- Providing funds on an ad-hoc basis.
- Major costs not clearly identified early on; this can result in the project being cancelled at a later stage due to lack of funds.
- Lack of ownership of the budget.
- No control or monitoring of actual expenditure.