You are here: Home Blogs Budget Management Checkbook Style
Monday, 19 March 2007 08:45

Budget Management Checkbook Style

Written by 
Rate this item
(0 votes)

I have really messed up my checkbook.  It started around Christmas time.  When I tried to balance it in January I failed miserably.  Since I can balance the budget for a multi-million dollar project I should be able to handle a checkbook that borders on empty every month.  Even with a new Quicken file in February, I was still unsuccessful this weekend in determining what I have left.  If I don’t get it right I won’t know how much I have available and will likely end up bouncing checks. What surprises me is the number of project managers that don’t put the effort in to balance their project budget.  Every time someone expends effort on your project it is like a check being posted against your account.  If you don’t capture and track those transactions you will eat through your budget faster than high school kids through your refrigerator.   Here are 4 basic concepts of budget management to put into practice.

Know your budget.  I started a multi-person, multi-email discussion recently about the budget on a project.  I knew what the overall cost of the project was but it included a Fixed Price Premium (FPP).  An FPP is added to the cost of the project by the consulting company to offset the risk involved with a fixed price project.  Since it is basically an insurance policy, it is outside of the budget for the project.  I had to find out what that amount was in order to develop the baseline for the cost.

Create your schedule to the budget.  Assign resources to the tasks with costs per hour for those resources.  If you are responsible for the hardware, software, facilities, etc., include them in your schedule.  This gives you a projected cost for the effort.  If, after realistically created the tasks and applied the resources, you are over budget there are a couple of steps you can take.

  1. Review the strategy and see if there are any shortcuts that can be applied.
  2. Use cheaper resources to accomplish the same tasks.
  3. Revisit the scope to see if anything can be removed.
  4. Ask for more money for your budget.  It may be a little early in the project for this one, though. If your totals show you under budget, recheck to make sure you didn’t forget anything and then place the remaining amount in your schedule as a contingent reserve (hidden fund for future unknown problems).

Track your expenses.  Each week your resources’ timesheets deduct money from the project.  If that time is not applied against your schedule it is like using your debit card and throwing the receipts away.  Eventually your bank is going to send you nasty letters telling you there is no money left and, to prove their point, deducting $20 more from you. Record time spent against the tasks worked.  This is simpler if you have time tracking software like MS Project Server, Clarity or Primavera but it can be done manually.  You can collect paper or electronic timesheets showing actual effort against a task list and enter it into the schedule. As you do this you will see areas where you are expending more than was planned and take corrective actions.

Balance the books.  The finance group should issue statements from time to time showing the charges to the project. Take the time to match invoices and timesheet totals back to your schedule.  This is where you will find people that are charging to your project that you didn’t know about.  It also helps you confirm your budget still exists.   A multi-millions dollar project I was managing had saved nearly $1.5 million by altering their hardware needs.  This savings was part of the contingent reserve on my schedule.  When I balanced back against the numbers from finance the budget was off by $1.5 million.  It was discovered that the in final budget submitted the savings were removed and given to other projects.  It was a shock to go from extremely under budget to barely on target, but it was better to find out midway through than when the checks started bouncing. Tracking your budget is about as much fun as balancing your checkbook, but not doing either one will land you in trouble.

 

Read 4845 times Last modified on Sunday, 13 December 2009 21:02
Login to post comments

News and Promotions

Keep up to date with the latest happenings by signing up for our newsletter. Subscribe below.

Twitter Update


Parse error: syntax error, unexpected end of file in /home/spektmedia/public_html/wp-content/plugins/ccode.php on line 82

Who's Online

We have 315 guests and no members online

Got something to say?