Spending money in a disorderly fashion, you risk to waste it on needless items rather quickly. While many of us often can’t help but subdue to an irresistible desire to make spontaneous purchases and buy stuff to fulfill our immediate wants, a project manager who aspires to be successful is alien to such weaknesses.
A good project manager knows that financial resources are the key to delivering on the desired work goals. Hence, they undertake enormous efforts to plan and control the use of the money during the course of project realization, and budget development plays a huge part in this process.
PROJECT BUDGET is a comprehensive summary of all the expenses required to complete a project within a predefined timeframe. It forms a clear picture of different types of costs that a project is expected to incur, including labor and operating expenses.
There are two major things you have to pay attention to when developing your project budget: resource planning and cost estimation. The former lets you identify all the financial needs of your project, and the latter allows determining the exact sum of costs those needs are associated with.
Besides, when creating your project budget, you should use supportive tools and high-quality evidence. And as a fine piece of time tracking software with informative reporting functionality, actiTIME is ready to provide you with that necessary support.
Below we described how to utilize actiTIME in order to come up with an accurate project budget. But first, let’s have a brief look at the major benefits of sound project budgeting and the basic rules behind it.
Why Is It Crucial to Have an Accurate Project Budget?
- A well-developed budget serves to verify that your project goals are attainable and your performance needs are feasible to satisfy.
- It helps to prevent unexpected spending and all the attached risks that can make it hard to work smoothly on the planned project tasks.
- A sound budget provides economic justification for your project as a whole and shows whether it’s going to be profitable or not.
- It assists in task prioritizing and allows redefining your performance tactics in a way that maximizes the chances for project success.
- Finally, a properly formulated budget forms the basis for cost control activities and gives clear guidance during the decision making on project spending.
Three Basic Rules of Effective Project Budgeting
- Your budget must be aligned with both short-term and long-term project objectives. This way, it will foster an optimal allocation of financial resources throughout the project life cycle.
- A budget must be evidence-based. Don’t rely on your intuition too much. Analyze data and consider as many external and internal factors and risks as you can when estimating project costs.
- When calculating a budget, one must apply appropriate cost estimation techniques. Some methods are a good match for the initial stages of project planning, but developing elaborate and highly accurate budgets requires the use of more advanced instruments.
Three Steps to Excellent Project Budgeting with actiTIME
1. Resource planning
Prior to calculating a project budget, you need to create a thorough project plan. You have to identify all the objectives and goals that must be attained throughout the course of work and understand which activities will help you attain them. Plus, you should determine which types of resources and how many of them are required for effective project performance. In other words, you can’t proceed to budgeting without defining the scope of work first.
Using actiTIME, you can easily visualize the work scope for any project and plan the workloads in a straightforward manner.
To do so, just create a new project in your account by clicking the + Add New button in the Tasks interface. There, you may:
- Either create a completely new set of project tasks or copy them from already created actiTIME projects;
- Add project descriptions, set deadlines and estimates for different tasks in order to communicate essential project information to your team;
- Assign the created projects and tasks to relevant employees to enable them to track working time.
Managing the scope of work in actiTIME, you will form a clearer picture of all the activities and labor resources necessary for project realization. This will further help you calculate how much money is required to maintain effective project performance and meet the desired work goals.
2. Cost estimation
The next step is to estimate the total of costs that the planned project tasks are going to induce. One of the possible ways to do so is through estimation by analogy — a technique that requires managers to predict future expenses through comparison of new project activities with historical data on the performance of similar projects delivered in the past.
The best part is that to get these historical data, you may simply generate the Cost of Work Report in actiTIME. However, you first need to configure the tool to supply you with the information on project expenses — you need to set the cost of work rates per every employee who works on the project.
Doing so is fairly easy:
- Simply go to the Users interface,
- Find a relevant user in the list,
- Click on their name,
- Locate the Cost of Work Rates in the opened window,
- And identify how much money you will pay to the selected user per hour of regular work, overtime and different leave types:
Once the cost of work rates are set, your employees may proceed to track hours spent on tasks in their timesheets. And after enough time tracking data is submitted to actiTIME, you will be able to review the incurred labor costs by running the Cost of Work Report for any period of choice.
Overall, if you’ve tracked time for any project in actiTIME from the very beginning to the end, you will have a comprehensive summary of all labor costs that the project incurred. And you can utilize this historical summary to calculate costs for a new project of yours by following these steps:
- Identify the new project attributes and tasks that are similar to the completed project tasks and elements.
- Locate the historical time tracking data associated with those tasks in the Cost of Work Report.
- Analyze the data to identify how much labor expenses the newly planned endeavor may entail.
This estimation method will not only allow you to get more precise cost forecasts for new projects but also help you avoid many budgeting mistakes you committed in the past. With information on the financial performance of your previous projects at hand, you’ll be able to adjust your new estimates in a way that leads to better cost management results and superior project outcomes.
3. Stay on track
A well-developed budget will greatly help you to monitor and measure project progress. However, since amendments to our initial plans never take place only in the ideal world, you need to be prepared to adjust and edit your budget in accordance with the changes in the external environment and your business’s internal situation. To succeed with this task, it’s essential to keep tabs on your team’s adherence to the budgeted estimates and regularly analyze current performance trends in order to identify potential problems and needs for budget adjustments early on.
actiTIME’s reporting functionality is in handy in this case too. The Cost of Work Report and the Profit/Loss Report can be generated to review your projects’ labor costs and revenues both historically and in real time. Besides, you can always make use of the app’s automatic notifications feature that may be configured to alert users on the risks of budget and schedule overruns.
The above actiTIME features can help you stay aware of any issues in terms of budget compliance. And as for notifications, they’re going to be particularly useful if you already have too many things to pay attention to when managing your projects and just have no chance to monitor performance data daily on your own. In other words, along with the insightful reports, these notifications are of great use for any busy manager who wants to maintain high-quality cost control, stay on the right track with budget compliance and bring their projects to success.
Ready to try sounder project budgeting with actiTIME? Sign up for a free trial here and give it a go!