TOPIC 3 : COST MANAGEMENT

II. Project Budget ?

1. What is the budget project ?
The Project Budget is a tool used by project managers to estimate the
total cost of a project. A project budget template includes a detailed
estimate of all costs that are likely to be incurred before the project is
completed.

Large commercial projects can have project budgets that are several
pages long. Such projects often have a large number of costs associated
with them, such as labor costs, material procurement costs, and operating
costs. The Project Budget itself is a dynamic document. It is continuously
updated over the course of the project.

2. Distinguish project cost and project budget?

Costing vs Budgeting

• Costing and budgeting are both essential for a firm to control its
finances and helps a firm to reduce its risk of making unrecoverable
losses.

• Costing and budgeting perform entirely different roles. Costing

estimates the future costs to be incurred for one unit of output and
budgeting makes sure that expenses incurred are pre planned.

• Budgeting is concerned with planning for the future, costing involves

evaluating past information.

• Both costing and budgeting must be carried out hand in hand, so that, a
firm can estimate its future costs and allocate funds for the right purposes.

3. Why do we need a project budget ?

that projects cost money, but it’s more nuanced than that. The budget is
the engine that drives your project’s funding. It communicates to
stakeholders how much money is needed and when it’s needed.

But it’s not only a means to get things that your project requires. Yes, you
need to pay teams, buy or rent equipment and materials, but that’s only
half the story.

The other part of the importance of a project budget is that it’s an

instrument to control project costs
4. Creating a project budget ?
To meet all the financial needs of your project, a project budget must be
created thoroughly, not missing any aspect that requires funding. To do
this, we’ve outlined seven essential steps towards creating and managing
your project budget:

4.1. Use Historical Data

Your project is likely not the first to try and accomplish a specific
objective or goal. Looking back at similar projects and their budgets is a
great way to get a headstart on building your budget.

4.2. Reference Lessons Learned

To further elaborate on historical data, you can learn from their successes
and mistakes. It provides a clear path that leads to more accurate
estimates. You can even learn about how they responded to changes and
kept their budget under control.

4.3. Leverage Your Experts

Another resource to build a project budget is to tap those who have
experience and knowledge—be they mentors, other project managers or
experts in the field.

4.4. Confirm Accuracy

Once you have your budget, you’re not done. You want to take a look at
it and make sure your figures are accurate. During the project is not the
time to find a typo. You can also seek those experts and other project
team members to check the budget and make sure it’s right.

4.5. Baseline and Re-Baseline the Budget

Your project budget is the baseline by which you’ll measure your
project’s progress once it has started. It is a tool to gauge the variance of
the project. Once the change control board approves any change you need
to re-baseline.

4.6. Update in Real Time

Speaking of changes, the sooner you know about them, the better. If your
software isn’t cloud-based and updating as soon as your team changes its
status, then you’re wasting valuable and expensive time.

4.7. Get on Track

The importance of having a project management software that tracks in
real time, like ProjectManager, is that it gives you the information you
need to get back on track sooner rather than later. If you manage your
project expenses using these building blocks you’re going to have a
sound foundation for your project’s success.