Tag Archives: budget

Budgeting Best Practices Part 2 of 6

Part 2: Define Scope

Background

Determining your project budget has been discussed several times on this website. The reason is that many projects experience budget overruns. Many project managers are still having problems determining a good project budget. Based on these facts, I decided to run a series on budgeting best practices for the rest of this year.

Interested?

If you are interested in knowing more about budgeting best practices,  SIGN UP on this blog (to the right, if you have not already done so)  to have all the blog posts of this series delivered to your inbox.

Step 1: Define Scope

As mentioned in part 1 of this series, determining you project budget is a four step process:

project scope to budget
From Project Scope to Project Budget

The first step is to define your scope. Can you get a good budget if you do not have a good scope?

Defining your scope does not consist of collecting requirements alone. A very important part of defining your scope is verifying you scope with ALL stakeholders.

Who are ALL stakeholders?

When identifying stakeholders look at your project sponsor, the end user(s) and all that could be effected by the execution of the project. Collect requirements from all your stakeholders, include the requirements in your scope and then go back to the stake holders to verify your scope. I know, this can be a lengthy and repetitive process, but it has to be done. If not, you run the risk of creating a product or service that will be rejected.

A Practical Tip

In real project life you sometimes have end users who give their input while you defining your scope, and during the execution of the project they have additional wishes (gold plating)

Other end users see the execution phase as the time to give input, not the scoping phase.

The way to handle these end users during the execution phase is to use judgment (interest of the sponsor and interest of the end user) and assertiveness (know when and how to say no). For more on how to handle these end users see

Next Step

Only after you have verified your scope, you are ready to proceed to the next step: Create WBS.

Related References

Budgeting Best Practices Part 1 of 6

Determining Your Project Budget

Scope Control Best Practices

Project Management Quick Start

 

Budgeting Best Practices Part 1 of 6

 

Part 1: Introduction

Here I am after a good summer vacation. As promised in July, after my vacation I would start our “Back-to-Work” series discussing budgeting good practices.

Determining your project budget has been discussed several times on this website. The reason is that many projects experience budget overruns. Many project managers are still having problems determining a good project budget. Based on these facts, I decided to run a series on budgeting best practices for the rest of this year.

Interested?

If you are interested in knowing more about budgeting best practices,  SIGN UP on this blog (to the right, if you have not already done so)  to have all the blog posts of this series delivered to your inbox.

Ok, let’s get started.

 

A Four Step Process

When asked to make a budget, many people start by making a budget, only to find out further down the road, that what they budgeted is not what the client wanted. Can you make a budget if you do not know what is needed?

Another often heard scenario is that “I have so much money to  do this project”.  Do you really know what is needed in this case?

Budgeting is not a stand alone activity. Budgeting is actually a four step process as shown here.

project scope to budget
From Project Scope to Project Budget

 

In this series we will discuss best practices of each of the steps needed to get a good project budget.

 

Related References

Determining Your Project Budget

Project Management Quick Start

 

 

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