Determining your budget can be experienced in two different ways: as a rewarding experience or as a daunting experience.
The difference in these two extremes lies in disciplining our self in taking the essential steps when determining your budget. Budgeting is not rocket science, but there are some basic and essential steps that we MUST adhere to.
The essential steps I am talking about are the those needed to go from project scope to project budget.
See these steps as the links of a chain. If one link is not good, your chain is not good. If one link is missing, you have no chain. The sequence of these steps is also important: Does making a budget before having a scope make sense? We are often tempted to skip one or more of these steps. We might be in a hurry or maybe it is a very small project. However, these steps are essential in good budgeting. Discipline yourself in taking them. For small projects, some of these steps are obvious and, are therefore not formalized. However these steps are there and have to be taken, even it is only mentally. Next is a brief description of each step.
In the scoping phase you get a complete picture of what has to be done. From the diagram we see that every following step depends on the scope. If the scope is not complete, nothing else will be complete. Start by disciplining yourself to get a complete scope before proceeding to the next steps. Verify the scope with your client. The scope is write-up and/or list of everything that has to be done.
Next take the write-up or list from the scope and break it down into smaller tasks. A good way to start your WBS (Work Breakdown Structure) is to ask yourself who is going to do what. Doing that gives you the first level of your WBS. Next break it down further as needed. Make sure that your WBS has everything that is in the scope before going to the next step.
Each element of your WBS takes time to do. Some WBS-elements have to be prepared, some have delivery time etc. Start your schedule by transferring all the WBS-elements to your scheduling program. Note that some scheduling programs call the WBS-elements “tasks”. Next assign a duration to each task. To get the total duration of the project you have to put dependencies between certain tasks as needed. If you stick to these simple scheduling steps, you should have pretty good schedule.
Each task in your schedule has a cost associated with it. Some of these costs are obvious, some have to estimated. You get your budget by adding up the costs of individual tasks.
Schedule and cost overruns are often caused by not having the discipline to take these essential steps or not having a complete scope. If your scope is not complete, there is no way your schedule and budget could be complete!
Can you perform an effective cost control if your budget is not good?
Taking the essential steps in determining your budget goes a long way.