Budgeting: How to Make the Most of a Budget
December 31st, 2020 in Productivity
When you are planning out a project, you need to budget how much time, money, and resources you will dedicate to the project. While it may seem straightforward enough, there are some tips you can follow to better budget. Budgeting will make it easier to keep your project within set parameters.
Why set out a budget? When a project goes over budget, it can be costly and time consuming. You may also have to stop the project all together if you can no longer finance it. This will cause you to lose customer trust, waste time, money, and resources, and also diminish company integrity.
The first step of creating a successful budget is to outline the project in a project plan. Document what the project consists of, the goals you hope to achieve, the deliverables, and what is needed to successfully complete the project. There are several ways to plan out a project using different project management methods. When looking at the project plan, determine the labour, procurement, and operating costs as well.
You also need to outline the individual tasks in the project and determine which ones are the most important and which ones are the most costly, time-consuming, and resource heavy. These tasks should be budgeted for first and then the smaller tasks that do not need to be completed right away for the project to work. This will ensure that you have enough money and resources to complete the absolute mandatory tasks.
The budget will continuously be reviewed during the project. When other projects end, or the company gains more resources, finances, or labour, you will be able to allocate more money and resources to the new project. This will change how the budget looks.
When creating a budget, it is important to review previous projects and their budgets. If you do several similar projects, you will be able to create a “repeating budget” that can be used as a template for future projects. For example, if you are a marketing agency that constantly does design work, you know that you allocate 80 hours of work to each design project and that costs $3,000. Say this repeats every two weeks. You can create a budget frequency that allows you to quickly review that design work typically takes 80 hours at $3,000 every two weeks.
Alongside budgeting finances, you also need to budget time. Record how long you believe individual tasks within a project will take, and section off enough time for the project so it can be completed by the deadline. If you complete the tasks earlier than expected, you will be able to reallocate the budgeted time to tasks that are lagging.
The same principle can be followed for finances and resources. It is better to budget more time, money, and resources than necessary for tasks than less. If you underestimate, you may run out of finances etc. If you over budget, and you finish under budget, you have that extra to reallocate. This provides some leeway in planning. You may also be able to do more with the task and the overall project with the extra time, finances, and resources.
One other important thing while budgeting is to create a contingency, which is an “emergency fund” that is set aside to compensate for unforeseen challenges. You can also create a sort of emergency fund for time and resources as well. If the project is due by a specific deadline, you can dedicate a certain number of hours before the deadline to finish anything in the project that was not completed before. If you do not use this time, you can complete other tasks and still be productive.