Determining a project budget is sometimes not taken serious. You will hear people say: Let’s get the project going, people want to see action. I have even heard someone say that budgeting is for sissies.
Another thing we often see or hear about is that some project managers/companies only use cost-reimbursable contracts because they do not determine budgets for their projects.
All those who are involved in the above practices are overlooking the reason project budgeting exists as a project management knowledge area.
Why do we Determine Budgets?
The reason we determine project budgets is embedded in the reason we manage projects: NOT TO LOSE MONEY
If your budget is not good or if you do not have a budget at all, you will end up losing money one way or the other.
Why will you lose money?
If you do not have a good budget, you cannot judge contract proposals. You will always leave money on the table if you do not come to the table equipped with a good budget.
Not having a good budget also upsets the project sponsors because you have to go to them every time you realize your need more money, which is usually the case or not?
Here is another scenario where we need a good budget: imagine starting a MEGA project without having a good budget. This will probable result in this project not being completed: MEGA money down the drain.
The good news is that good budgets can easily be determined. All you have to do is discipline yourself to follow the steps depicted below.
Yes, I have seen budgets that even did not have a scope properly defined.
Believe me, good budgets can be determined if you follow the steps above.
Having a good budget is very important for every project. I will spend the rest of this year (after the summer recess), September through December, discussing the importance of the steps shown above. Let’s call it our back to work series.
I also realize that many project managers are not given the time or resources to determine a good budget. I encourage those of you who are in such a situation to join this discussion so that we can address these issues and help each other.