One of the keys to managing any project is preparing the budget correctly. Once the budget is designed, it will be much easier for us to advance in its development and complete it successfully. We are going to discover how to create the budget for your project step by step so that you can overcome this challenge successfully. They can be cost forecasts, definitions of objectives, cost estimations, etc. By following them, we make sure not to leave anything to chance that could disrupt our plans.
6 tips for budgeting your project
As you well know, the budget must include the expenses, in addition to the hypothetical income acquired or in the process of being acquired. When establishing a professional budget, it is enough to take stock of the difference between expenses and income. But if we want to prepare a definitive budget and present it to the client, to the management or to those responsible for the organization, the following steps will have to be followed.
Also read: Is it possible to save money and turn it into more money?
Defining the objectives and scope of the project
First of all, it will be necessary to establish the objectives of the project, if possible with a SMART methodology, you can download the Smart Objectives template in Excel on our blog. Depending on the objective or objectives that we have, the scope of the project must also be defined. In this way, we will know the available resources or temporary restrictions, which will condition the budget. This step also allows us to identify what is not included in the project objectives, avoiding budgeting unnecessary expenses.
It is the first calculation we will do. Generally, they are divided between direct and indirect expenses based on their relationship to the project. But beyond this division, it is interesting to classify expenses into the following categories:
- Labor: if you know who will be in charge of developing the project, you will know how much to pay them. This includes labor hired from third parties, outsourced tasks, etc.
- Acquisitions: all the external resources that you need to buy to move the project forward.
Equipment: the tools that you are going to need, but also services or supplies (water, electricity, internet, telephone, computers, programs…) are part of this expense.
- Training – Is it necessary to train someone specifically for this project? This chapter of expenses also includes the education and training of new hires.
- Spaces: the reservation and rental of meeting rooms or other spaces to develop the project are part of this chapter.
- Research – If the project includes a research phase, it can have its own budget line.
- Travel: Like the previous chapter, we may have to travel. Gasoline, train or plane tickets, hotels, diets… We cannot lose sight of them.
The budget does not cease to be an estimate of amounts. For this reason, we can implement different strategies, such as making individual estimates, stipulating a fixed amount for the budget, and comparing the budget with that of similar projects… Take into account the different scenarios, especially the most catastrophic ones.
Create a contingency fund
As much as we have estimated the worst possible scenarios, things can always get worse. Unforeseen events of all kinds can arise, hence the importance of creating a contingency fund that oscillates between 5 and 10% of the total budget. Thus, in case of any unforeseen event, we make sure not to compromise the project —or the budget—.
Also read: How much do you need to save to secure your future?
We already have enough details to create the budget. We will capture it in great detail, being as precise as we can. You can include a schedule with the different estimates, all the documentation and the total cost of the project. Now you can present the budget.
In the same way that we have a contingency fund, it does not hurt to have a budget control plan. It will be necessary to know when to review the budget or control systems, as well as possible saving measures if we are exceeding them.