One of the biggest issues professional service directors face in their careers is how to get a project back on track once it has gone over budget. But, perhaps the better question is, how do we prevent over-budget projects in the first place? In this guide, we’ll go over the best way to create a project budget management plan, how to gracefully deal with a project behind schedule, and more.
But first, why is this important at all? Besides the obvious (failing projects and losing clients), budget tracking in project management helps you figure out what you can expect to spend on each different element. Then, you can compare your expectations with each step of the process and course-correct as needed. And when it comes to budget, an ounce of prevention can be a make or break for your client.
How to prepare a project budget plan
Follow these points step by step to draft and finalize a foolproof estimate.
Prepare a document that details client expectations and make sure it is signed by both parties. The best way to kickstart this is to host a full team meeting where everyone gets a chance to ask clarifying questions and get on the same page.
Review the budgets of similar past projects. The data saved in your project management software tool can help you look for possible roadblocks. Or, it can help you duplicate past successes!
Make a list of every feasible expense this project could incur. Keep this estimate internal, to begin with, and have your team leads double check it.
Add a 10-15% buffer for projects over $10,000. That way if any contractors underquote or supplies get lost, you’ll still have room to maneuver.
Include change orders to cover unplanned work. You can add this or the buffer we just mentioned. Or both!
Use a project management tool. For example, Wrike has created an API to calculate project budgets. Take this information and compare it to your current draft. Or, skip straight to this step after your initial project kickoff meeting!
Ask your client to sign and review the budget draft. Having it in writing ensures proper communication.
These quick tips will help you form healthy budget habits long term.
Build a budget review into your weekly progress reports. Don’t be afraid to re-baseline as needed. And let your team know about your project status analysis as well.
Share real-time budget updates with your team. Or, better yet, give them access to your project budget plan so they can view it whenever they want.
Delegate cost controls to team leaders. As long as all expenses are tracked via your preferred project management tool, everyone will be able to keep an eye on the budget.
Keeping clients in the loop
Great communication creates great outcomes, no matter what issues you run into.
Use a project tool that provides full transparency. Visual tools like Wrike allow your clients to get at-a-glance project updates with color-coded tasks, assignment details, and real-time statuses.
Define and agree on project KPIs with your client. You may find that each step of the project will have its own set of KPIs. As long as you and your client can keep track of them, it’s totally doable.
Warn them in advance if you anticipate budget issues at any point during the project. Train your team to alert your clients when they start to approach the upper threshold (the last 10-15%) of their budget. Then, follow the tips in this next section.
What to do when a budget goes over
Take a deep breath and follow these super easy steps.
Review what happened and why. Take a look at KPIs, any related project management dashboards, and notes from team members.
Consult all related parties individually and as a team. Can they provide additional insight? Make sure to then discuss two to three possible alternatives you can present to your client. Price these out and define what the rest of your project will look like for each choice in a clean, visual way.
Hold a meeting with your client ASAP. Be professional and candid. Let them know where the issue came up, what you plan to do about it, and what options they have moving forward. This proactive approach will help them feel confident in your abilities. It may even breed more creative solutions that no one had thought of before!
How to get a project back on track
The short answer: Use an online and live project management tool.
The long answer: We’ve already mentioned a few key reasons why this step is crucial. But in a nutshell, project management tools have major features that prevent common budget issues from happening in the first place.
For example, you can anticipate budget issues before they even come up simply by defining workload expectations, laying them out visually, and identifying bottlenecks ahead of time. Then, you can restructure your resources to better fit your client’s needs.
Save multiple drafts of your project budget plan and pair it with timeline examples to help your clients understand exactly what they stand to gain from their investment.
Want to see how it works?
Be sure to check out Wrike’s free trial and find new ways to predict and prevent over-budget projects.
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You can use tools such as cost accounting systems, invoices, receipts, timesheets, and expense reports to collect and record the actual costs of your project. You should compare the actual costs with the baseline and the contingency to monitor the variance and the performance of your project budget.
There are four project budgeting approaches: analogous, parametric, top-down and bottom-up. Analogous is an estimating technique that uses historical data to help determine the cost of the current project. It looks at past projects that are similar to figure out the cost and duration of the new project.
The best way to answer project budgeting questions is by providing concrete examples that illustrate your budgeting expertise. Start by explaining the specific budgeting process you've employed in past projects, detailing how you estimated costs, allocated resources, and managed expenses.
Budget tracking is monitoring income and expenses, ensuring projects stay within budget. Effective project budget tracking is crucial for businesses as it promotes financial accountability, efficient resource allocation, and improved decision-making.
Options' Budget Monitoring and Tracking Tool allows users to generate evidence that can be used to inform advocacy and decision-making during priority setting in the next budget cycle, including on allocation disbursem*nt and expenditure.
The major benefit of being able to track expenses is project budget monitoring. Only when you can keep a check on the budget can you make tweaks and adjustments to spend the budget optimally.
Budgeting. One of the key responsibilities of a project manager is to keep budgets under control, so in order to avoid overspending, the initial budget forecast would need to be precise. This involves closely monitoring expenses, tracking cash flow, and identifying opportunities for cost reduction.
A program budget and timeline are essential tools for any program coordinator who wants to plan, manage, and evaluate a successful program. They help you estimate the resources, activities, and outcomes of your program, and track your progress and performance.
If you've created a budget through a baseline, you can do more extensive tracking by comparing the actual and scheduled costs against the baseline costs. To determine whether you're on budget or not, you can view the cost variances between scheduled costs and baseline costs.
Managing resources effectively is key to staying on budget and schedule. This includes not only human resources but also physical assets, technology, and financial resources. Regularly assess the allocation of resources, making adjustments as necessary to ensure optimal utilization.
Plan and Review your Development Roadmap Frequently
Ensuring the project gets done on time and on budget the software product needs a detailed UI/UX design and a specification document. All front end and back end features need to be surveyed and confirmed by the client, the software architect and the project manager.
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