What is the price for the project and is sufficient funding available? There are many good reasons why the project needs to be in control with the money.
Many projects cannot deliver within what is initially estimated. No matter whether it is because of poor initial estimation or because of poor execution, then budget overruns will impact project owners’ overall view whether the project is a success or not.
Having the funding that is needed to conduct the project including sufficient buffer for unforeseen challenges means stability. Overruns on the other hand gives extra work to chase money, to report, explain, replan and re-scope. In the worst case the existence of the project can be in danger.
Creating the initial budget is a key task including being clear on the assumptions. Monitoring actuals vs budget and being able to identify deviations and early warnings is equally important. Keeping a budget will in most cases require a special focus, effort and ability to (brutally) control scope and timeline.
| Activities |
|---|
| Establish project budget |
| Identify budget procedures to be followed |
| Define format for budget |
| Document budget assumptions |
| Create budget |
| Align budget with (detailed) scope |
| Align budget with project plan and staffing plan |
| Incorporate contingency |
| Allocate sufficient funding for stabilization after go-live |
| Review budget |
| Get budget approved |
| File baseline budget |
| Define process for follow-up on budget |
| Establish time registration processes |
| Establish processes to track project costs |
| Define frequency for budget follow-up |
| Define follow-up routine |
| Define reporting format |
| Establish change procedure |
| Define tolerances (need to involve project owner and SG) |
| Risks |
| The project has an endless need for money |
| Problem: Extra funding has been granted to the project multiple times. Consequence: Sunk cost considerations are forgotten and the project may be pursued beyond financial reasoning. In addition, stakeholders may lose faith in the project. |
| Limited tracking of actual vs. estimated costs |
| Problem: Actual vs estimated costs are not tracked consistently. Consequence: Early warnings about underestimation may be missed. The opportunity to initiate early corrective action is missed and important learning is not being incorporated into future estimation activities. |
| Budget lacks risk contingency |
| Problem: The project budget does not contain risk contingency for unforeseen events. Consequence: The project is vulnerable to small deviations from the planned costs and will need to spend time replanning or refunding these deviations. |
| Project is underfunded |
| Problem: Inconsistency between project scope (what we want to do) and the available funding (what we can do). Consequence: It may be difficult to realize the defined scope with what's available. The project may have to spend time reducing scope or finding additional funding. |
OBV Consulting ApS
Skovvej 5 DK-4180 Sorø
info@obvconsulting.dk
Ole Barkou Vilstrup
+45 61 62 73 12
obv@obvconsulting.dk
Good project knowledge base sets the scene for project management and provides an intro to its main disciplines. Get inspiration for project execution through action templates, risk lists, key figures and find inspirational guides on how to deal with typical challenges in projects. Read more