• 21 Ways to Excel at Project Management

Defining the Budget

Question 5: Have you defined a detailed project budget?

Good Practice: Define all costs in the form of a project budget. Your budget should include all external costs such as licences, third-party services, consultants, consumables, etc. This budget should be signed off by the steering committee or other authority to make sure enough funds are readily available.

A few basic rules will help make sure an accurate and realistic budget is produced:

• Assume that people will only be productive for 80% of their time.
• People working on multiple projects take longer to complete tasks because of time lost switching between them.
• People are optimistic and often underestimate how long tasks will take.
• When creating your budget, use other people's experiences and your own.
• Get 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 a Work Breakdown Structure to arrive at a total rather than trying to cost the whole project.
• Agree on a tolerance amount with your customer for extra 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 they are always aware of the current position.

Common Mistakes

• Lack of budget ownership.
• Providing funds on an ad-hoc basis.
• Significant costs are not clearly identified early on; this can result in the project being cancelled later because of a lack of funds.
• No control or monitoring of actual project spending against planned spending.