Any company owner or project manager knows first hand the importance of managing expenses. If you have worked in a profitable organization or owned one then you understand the factors that affect gross profit. Some of them are oversight, waste of resources, under budgeting, etc.

Not being able to manage a provided budget can lead to a lot of problems in the long run. These problems can show up in different forms like additional expenses, delay of job completion, divergence from the proposed timeline, etc. All of these are not good for business.

This is why project budgets must be properly planned and executed to help your business achieve its project objectives with the allocated funds or better yet, less. So, what is the company budget? And why are they important? Let’s find out

What is Project Budget?

A budget in its entirety is a document containing a plan of action or event e.g advertising, social gathering, building construction, rebranding, inventory purchases, etc. Where the expected amount of funds needed to achieve this set goal is also calculated to the nearest estimate.

Although it is usually formed before the commencement of the project, budgets are usually reviewed and adjusted throughout the project.

Why Do You Need a Project Budget?

Any project worth executing is worth executing well and every business owner will agree with this. Projects cost money and budgets help in creating a margin for the approximate amount required to achieve them. It also acts as a baseline or threshold, depending on the type of project to be executed.

6 Tips On Executing a Business Project On a Budget

There are several ways to help you manage your company’s budget and ensure that it is adhered to judiciously. However, here are 6 strategies that will go a long way in helping you achieve your business’s goals:

1. Set a realistic budget at the start

The most frustrating thing for you as a project manager is to manage a project on a budget that is impossible to execute. A lot of people like to form their budgets on wishful thinking, assuming that nothing can go wrong. These sorts of budgets can bring you all sorts of trouble.
If you have worked on a similar project, refer back to it and try to compare that experience related to the budget. Use this to review your present project so you can plug up future potential hiccups.
Ensure that there is wiggle room in your budget as strict budgets always tend to require revision during projects, so save yourself the headache.

2. Prepare for fluctuating market conditions

When preparing to execute a project, there should be allowances made in the budget for sudden spikes in prices for goods. In these uncertain Covid-19 times, all areas of the economy have been affected. These include distribution, manufacturing, labour costs, production, etc.

All these factors could have a positive or adverse effect on the value of certain items on your budget. So keep a close eye on this possibility as you occasionally review your budget. This is vital because it could certainly become a major issue for you in the nearest future.

3. Be Aware of your effective bill rate

Having specific pricing for your time spent is always a good way to go when billing your clients for your services. This is because having a fixed amount per hour/day helps you calculate precisely, your team’s efforts whilst billing your clients.

This is especially helpful when your client requires a disproportionate amount of non-billable hours so you can price your jobs according to your rates.

4. Precisely identify and manage change

With regards to project management and budgeting, change is almost inevitable. As long as the project is large enough to require your expertise as a project manager, then there will surely be changes needed to be made. These changes are often due to human error, changes in prices of materials, or choice of items.

Although these could seem like small changes, they can cause a significant rise in total expenses. This is why you should work with change management specialists to identify, document, and communicate strategies to make these changes to the stakeholders.

5. Establish relevant KPIs

Key performance indicators A.K.A KPIs are great tools for observing the progress of a project. They help you ascertain the difference in margin between the budgeted amount and the final expenses during the entirety of the project.

Useful KPIs used in project management include; Cost variance, Planned value, Actual cost, cost variance, and most importantly, ROI(Return on investment). It is an uphill battle trying to complete a project without utilizing appropriate KPIs.

6. Prepare to make adjustments

During a project, reviews and revisits are vital throughout the entire duration. Projects are usually referred to as a living breathing entity, and rightly so because they are fluid and evolving. The clients could have a change of heart about a certain aspect of the project or some materials may just be too expensive, or you require more labor than previously expected.

So many things can change during a project, this is why the budget must be reviewed and if needed, adjusted.

Conclusion

The success of a project is largely due to preparation on the part of the client, your knowledge of the project at hand, and both parties’ willingness to keep a healthy communication line. As earlier stated, projects are alive and thus should be treated as such. If everything seems too daunting, you can always employ the services of afinancial expert. They will try to ascertain what the client wants and what they ‘need’, this will go a long way to helping you achieve your objectives.