Since the success of the project budget is a key determining factor of the overall success of the project – depending, of course, on who the judge is – then I thought that it was important that we spend some time discussing the project budget in more detail.  How it is originated, who manages it and how, when and how to take corrective action, and – finally – what the customer’s role is in the project budget.  These all change a little based on several factors:  project size, project visibility, whether it’s for an internal or external customer, and in what industry the project is taking place.  But in general, I think we can look at projects and budgets and speak on a higher level that is fairly applicable across the board.  If I get too specific, please forgive me and feel free to comment and offer your own input.



For this article, let’s look at the origination portion of the project where the project budget gets assembled.  This where it all starts…so what do we need to get started?  Speaking from my experience – which is usually what I’m basing all of my articles on to some degree – I start putting the project budget together using one or more of these items:

 

 





     
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  • Statement of work




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  • Draft resource plan from Sales or an account manager




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  • Draft high-level schedule from Sales or an account manager




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  • Initial input from the customer (again, usually gathered during the sales process)




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  • Historical budget/actuals information from similar projects, as available




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  • Peer discussions with the project team (if assigned at this point)




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Putting it all together



For me, it really starts with the resource plan.  And the resource plan has to come out of a realistic project schedule.  So step one is to either start with the draft high-level schedule you’ve been handed or create one yourself.  Step two, of course, is to take other things like the statement of work, project schedule templates, historical project schedules, the known milestones and deliverables on this project, etc. and put together a project schedule that contains as much detail as you can put into it.  This isn’t going to be the perfect project schedule – but it will likely be the one you take to the project kickoff and discuss in detail with the customer and the project team once assembled.



From this more detailed project schedule comes the resource plan that allows you to put your project budget together.  Using the project schedule, map out your budget forecast week by week through the end of the project based on task estimates and resource billing rates.  Be sure to include other things that are known at this time such as consumables and any third party vendor services that will be needed (make assumptions if you have to using historical project information).  The important thing to understand is that at this point you’re putting your best guess into the project budget knowing that in the first few weeks of the project – during the kickoff and planning phases – more detail will be added, decisions will be made, and changes will be implemented that are definitely going to affect the project budget.  So get as much detail as possible into it now, but don’t kill yourself over it because it will be changing.



Summary



The key takeaway here really is that you need to get the project budget started off on the right foot.  Just like you strive to get the project kicked off successfully from the beginning, starting your project budget off with something that is detailed and manageable at the beginning of the engagement can make a world of difference on how easy it is to managing going forward and how accurate it is.  After all, the more accurate and realistic it is, likewise the more manageable and useable it will be.  If the project budget isn’t realistic, you’ll find yourself fighting financial fires throughout the engagement.