Staying in control of your budget is often easier said than done. This is especially true today, when organizations are busy bouncing back from the global pandemic and trying to re-align business objectives to a new way of working.
For project managers, the emergence of remote working just made project budget management that much harder. Tracking team spending and retaining control of spend visibility is increasingly complex, and without the right tools and processes in place, remaining in budget is near impossible.
Fortunately, budget management doesn’t have to be quite so difficult.
Here are 5 tips to help you properly manage your budgets in 2021.
1. Frequently check and adjust your budget
Keeping up-to-date with your budget is arguably the most important factor when it comes to project budget management.
If the pandemic taught us anything, it’s that there’s change around every corner, and remaining responsive to this change is critical to success. The only way to do so is to frequently adjust, update, and scrutinize your project’s budget so that you remain on track.
To steal from the world of physics, good budget management comes down to one thing, and one thing only: entropy. In short, entropy is a measure of disorder, and in order to mitigate entropy and keep order, it requires a third-party energy source (in this case, it requires you to keep checking and adjusting your budget). Without this constant effort, the only logical path is chaos and disorder, or overspending and project failure.
2. Monitor resource usage
One of your project’s biggest areas of spend will be labor. It’ll also likely be tools and technology.
Much like constantly tracking your budget, successful project management comes down to constantly tracking your resources, too. Regularly review the number of people working on your project and, if you’re overspending, re-strategize so you remain within budget. The same applies for your tech stack.
Taking the time to review your project resources will ensure that you use them effectively. It’ll also help you understand whether or not you need more resources in order to successfully complete your project.
3. Involve multiple stakeholders
Teamwork makes the dream work. This is true of your project, and of your project’s budget. To help you stay within your budget, it’s important to involve your entire team. This will help foster a conscious and healthy spend culture, one where every team member actively considers the project’s budget prior to making a purchase.
With everyone involved in project budget management, you can reduce rogue spending, increase accountability, and ensure that unnecessary expenses are minimized.
4. Maintain your project focus
For every project, there is a tendency for some unplanned work to find its way into your timeline.
This ‘scope creep’ can lead to a big shift in focus for your project, which will ultimately lead to failure both for your project budget, and your project itself. To reduce your risk of scope creep, it’s critical to constantly remind team members of your project’s original focus.
At the end of the day, un-scoped work costs billable hours. It might also cost external expertise, new tools, or any other additional resources. If you haven’t accounted for this in your budget, overspend is almost guaranteed.
Of course, for each project you manage, factoring in unexpected changes is an important consideration. If you budget for this, you can remain open and flexible to change without fearing project failure.
5. Automate your budget management
For many project managers, a lot of time is consumed with monitoring progress, managing forecasts, and adjusting budgets after team members have filed expense requests.
This reactive approach to project budget management can play a part in a project’s success or failure. Not only does it cost you time away from more important parts of your project (like helping your team members remain in scope), but it also leaves you managing your budgets reactively, rather than proactively.
When it comes to your budget, working reactively can be detrimental. After all, you need to know the health of your budget in real-time so you can make informed change-management decisions and successfully navigate the path to project completion.
To do this, automate as much of your budget management as possible. It should be easy for team members to file expense reports the minute they make a purchase, for example. You should also know in real-time how much is left in your project’s budget without having to consolidate receipts.
Successful project budget management requires everyone
Smart project budget management doesn’t just come down to you. It requires conscious input from everyone involved in the project, from contractors to full-timers to external agencies you’re using.
Without a clear budget in place, and without constantly monitoring your spend and your resources, it’s difficult to keep costs low, keep people on track, and finish your project within scope, and more importantly, within budget.
Editor's note Original publish date: 16 May 2017 Original author: Dennis Hung We've since updated and republished this blog post with new content.