The Importance of Good Project Budgets

Background

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.

Measure Your Money
Your Project Budget

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.

Good News

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.

From Project Scope to Project Budget
From Project Scope to Project Budget

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.

 

Related References

Determining Your Project Budget

Scope Control Best Practices

Project Management Quick Start

 

 

 

 

6 thoughts on “The Importance of Good Project Budgets”

  1. victor, thanks for this wonderful and simple notes on THE IMPORTANCE OF GOOD PROJECT BUDGETS . it is well explain to my knowledge , keep it up !!!!

  2. Victor, thanks for the insights into good budgets. The challenge has always been clients not having the patience for preparing a good budget. Once project idea is conceived the next step is execution rather planning. As a Project Manager it hasn’t been easy insisting on budgets before project execution. Can you share how you go around such challenges?

    1. Edward thank you for your comment. Your comment is very valuable to this discussion because it is a very common real life situation. Clients want to see action once the project is approved and not planning and budgets.
      The way to handle this challenge is to document the adverse consequences of not having a good budget and then presenting this to the client. Like that you are covered as the project manager and eventually the client will realize that you were right.

      As a professional project manager you should never give into project management mal-practice. Do not forget that you are the one responsible for the successful outcome of the project. I know it takes courage, but it works, believe me.

  3. Victor your simple language and vivid message is par excellence.
    Hope we will have more on budget determination in future blogs.
    I recommend that practitioners of project management follow
    this blog with curiosity . Difficult hitches will be made easier.All
    the best.
    Thank you,
    Suhail.

    1. Suhail. Thank you for your very nice comment.
      Indeed, participation in these discussions will benefit all of us. I get to know what the real life problems are, and the participants then get my feedback.

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