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Project budgeting is extremely important. Not only is a budget a planning tool, but a cotroling tool as well. A rolling and flexible budget embodies objectives, and provides a means of comparing actual results against desired outcomes.It is also important for responsibility accounting. That is, responsible personnel are held accountable, and should explain rhe variances between the budgeted figures and the actual figures.
Budgeting is not a trouble-free process, though.If budgeting is participative, participating personnel may set easy-to-achieve, self-serving objectives. If budgeting is centralized, departmet heads may reject the budget ojectives. When preparing a budget, there could be difficulties associated with data gathering.
in order to determine the budget , we have to creat the
scope baseline
scheduale baseline
WBS
activity list
resources calnder
cost baseline including contingency reserve
then management reserves
to understand all the above details is a very important experience .
its important to the project because after determine the ROM budget , the sponser and stakeholders will decide if they need to o this project or not , or shall go for other projects suitable for them
a lot of problems if this estimation was wrong .
The project budget is a detailed estimate of all the costs required to complete project tasks. It is much more detailed than the high-level budget developed in the Initiate Stage. The typical budget specifies costs for staff labor, materials procurement, ongoing operating costs and other direct costs such as travel or training. The detailed budget provides the project sponsor with a best estimate of how much the project will cost. The detail budget helps manage expectations and gives the project sponsor information to develop a cost/benefit for the project.
Below is a list that will help when budgeting for a new project:
Learn from previous projects
Know your core costs
Prepare to change budget estimates
Monitor resources
Be transparent
Manage scope
I follow the below items for setting Budget:-
1- Previous experiences (Previous data, information & tools)
2- Make analysis for previous data, information & tools which is suitable with next period as variance analysis for current period.
3- Carefully study for company strategy (budget has to match with company Vision & Mission).
4- Laws and regulation.
5- Make variance analysis between company plans and industry market.
6- External Factors like inflations, Currency exchange rates, Political status, previous crises & problems and solutions.
7- If it is the first time for the company I depend on market and same industry as it is available if not make simulation for nearest same projects.
8- Make forecasting for budget as new effects during apply.
9- Use updated financial & Statistical methods.
10- Technology and technology development.
The most problems as we mentioned:
1- Budget does not represent Actual and estimation very far from actual we can overcome by preparing forecasting for budget.
2- Forget crises and external factors
3- Forget Error factor to overcome this factor we have calculate Error ratio.
4- Severe changing at external factors, technology and laws.
5- Missing for industry details
6- Missing some information rated to operations
An experienced project manager will have the advantage of the lessons learned from previous experiences and will be a better judge of utlizing the project budget at the right times needed;
The importance of Project Budget is high as this determines how the project manager can have a free hand in succeeding his/her project within the deadlines. Wrong estimation of budgets leads to all kinds of chaos and delays in the runnning of the project.
Well, I think its the one and prioritized parameter which must be addressed in the first place whatever you are going for either project or some business, Budgeting lets forsee what are we going to spend and what should we get back after investing, infact it helps us alot improve our efficieny and leads us to set such SOPs which can amplify our output.
And if we fail setting our budget, which i think is non-official approach, I think we would not be able to get desired outcomes.
If you are asking about business budgetting vs. project budgetting, these are two different processes with different inputs, outputs, participants, & processes.
A project manager is responsible for the project budget which is mainly an expense budget. Effective use of most of the project management systems will produce the associated costs as a by product of the planning process. The project manager with the project team should execute the project plan within the approved expense budget. Any deviation should be approved by management and/or customer before implementing them.
