Project Management The Project Budget – The Customer’s Role Published on 14 March 2011 - Revised on In this final segment of the four-part Project Budget series we look at the customers role in the project budget. Previously we've looked at “Getting it Together,” “Managing it,” and “Taking Corrective Action” as we waded through the first three parts of the series. In this article we’ll take a closer look at the customers role in the project budget. There are many times the customer doesn't really want to have much to do with the budget. I’ve led projects where the customer doesn’t want to see the project budget information on an ongoing basis or only the sponsor wants to see the budget detail. In these cases, that means that it’s something that can’t be included in the ongoing formal weekly status report or discussed on the weekly formal status call with the customer. That’s not a major problem, but it does become more work on the information dissemination side as the project manager must now produce additional status information – one with budget detail and one without. And you must also be concerned with ensuring that the budget information doesn’t get into the wrong hands. Of course, this type of information distribution is best determined at project kickoff with the customer and documented in the project communication plan. Ideally, the customer is involved and wants to be involved in the ongoing budget management. When the customer is aware of the budget and project financials information on a weekly basis then they are continually informed and are aware, in advance, when issues start to arise with the budget on the engagement. It’s never fun sharing bad news with the customer, but when it’s done early when corrective action is still possible then you have the chance to keep customer satisfaction and confidence high and your customer can take an active role in helping your team resolve issues with the budget, just as you would want to engage them early in any type of project issues resolution. This rings home very true to me as two projects that I managed in the past experienced budget issues with very different end results based on the type of information dissemination that was used on the project. Project #1 involved a software implementation for a large government agency which had a budget in excess of $1 million. At senior management direction, I reported the budget status information at a very high level on a weekly basis. It was definitely not evident through the status report that we were experiencing budget issues. These budget problems came about due to a complicated data load situation which caused us to expend many extra hours on that particular phase of the project. By the time senior management approved full budget disclosure to my client, it was really too late. And when the customer refused to add more money to the project, it was placed on hold and eventually canceled altogether. Project #2 was a project that involved full budget disclosure to the customer every step of the way – which is more inline with how I like to handle all of my projects. My customer received weekly updates of the entire project financials situation – including both actuals to date and the forecast for the rest of the project – so they knew at any given time how over or under budget we were. The customer remained confident in the handling of the project even when they would see it stray by 5-10% over budget because it was never out of hand and they could assist in the decision making for any corrective action that may need to take place. Summary Some customers may indicate early on that they don’t want to be involved in the project budget. I highly recommend otherwise. Providing this information to the client serves two key purposes: #1 – It keeps you accountable to do a very detailed job of maintaining the project budget and forecasting it carefully on at least a weekly basis. And Rate this article: No rating Print Brad Egeland Brad Egeland is a Business Solution Designer and an Information Technology / Project Management consultant and author with over 25 years of software development, management and project management experience. He has successfully led project initiatives in Manufacturing, Government Contracting, Creative Design, Gaming and Hospitality, Retail Operations, Aviation and Airline, Pharmaceutical, Start-ups, Healthcare, Higher Education, Nonprofit, High-Tech, Engineering and general IT. Full biography Full biography Brad Egeland is a Business Solution Designer and an Information Technology / Project Management consultant and author with over 25 years of software development, management and project management experience. He has successfully led project initiatives in Manufacturing, Government Contracting, Creative Design, Gaming and Hospitality, Retail Operations, Aviation and Airline, Pharmaceutical, Start-ups, Healthcare, Higher Education, Nonprofit, High-Tech, Engineering and general IT. In addition to his accomplishments in IT development, resource and project management, he has also authored more than 6,000 expert advice and strategy articles and more than a dozen eBooks and videos on project management, business strategy, and information technology and best practices for his own website and for clients all around the world. Brad is highly regarded as one of the most prolific go-to authors on project management. x Contact author Google Plus Twitter Linked In
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