The financial planning

→ Financial planning – the project budget

A budget is a financial plan for a defined period, often one year. It may also include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. Companies, governments, families, and other organizations use it to express strategic plans of activities or events in measurable terms. A budget is the sum of finances allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them. It may include a budget surplus, providing money for use at a future time, or a deficit in which expenses exceed income.

A project budget is the total projected costs needed to complete a project over a defined period. It’s used to estimate what the costs of the project will be for every phase of the project. The project budget will include such things as labor costs, material procurement costs and operating costs. But it’s not a static document. Your project budget will be reviewed and revived throughout the project.

The key to creating a project budget is to make all the line items easy to track. If you can apply a straightforward process to project expenses, then you can monitor the spending on a project accurately and timely. The first step in creating a budget is to identify expenses. You need to list everything that’s required to bring a project completion. This includes wages for labor, equipment, materials and more.

Examine your project plan thoroughly and identify expenses on your own to start. Then, your team members might be able to help you recognize certain expenses that you didn’t recognize immediately, so be sure to ask them to look over your expense list when creating a budget. It’s imperative that you list absolutely every expense. The more you identify, the less you’ll be surprised by unforeseen expenditures later in the project.

Here below you can find a short checklist:

1. identify your expenses

2. estimate your costs

3. add in extras (reserve, contingency costs, etc.)

 

By using template 7c, the trainer asks the teams to identify expenses and estimate budget. What can you do if the estimated expenses exceed the available budget?