Role

Manage the Budget (Large Project)

1

Project Manager

Manage the budget

Review how your project is performing against your budget on an ongoing basis. Because of how financial reporting is done, you may need to manage the budget on a monthly basis, even though you update the schedule on a weekly or bi-weekly basis. For more information on potential budget problems see 4.1.2.3.1P Trouble Signs for the Project Budget.

2

Project Manager

Update your project forecasted budget

After you have updated your schedule to reflect the work remaining to complete the project, you should also estimate the cost of the remaining work. This is usually referred to as “forecasting.” This is the process of understanding your current costs, costs that are in-progress and the estimated costs to complete the remainder of the work. These three costs should be compared to the project budget to make sure that you can still complete the project within expectations. If your forecast shows that you are trending over budget, you need to put some proactive activities into place to get back on budget.

3

Project Manager, Sponsor, Stakeholders

Communicate any budget risk

As soon as you feel you are at risk of missing your budget, you should communicate this risk to the sponsor and management stakeholders. You do not have to state that you will miss your estimates for sure. However, you should start to communicate the risk so that you can implement actions to try to keep the project back on track. If you are sure that the current commitments cannot be met, new estimates need to be prepared and communicated to your management and to the sponsor. This is important information to communicate because there may be areas where they can provide input. For instance, the sponsor may agree to reduce the remaining requirements to allow the project to complete within the original estimates.

 4

Project Manager

Manage cost variances

The project manager needs to track the actual spending on the project against the estimated spending for the project. For example, it is not enough to just say that the project is half over and the budget is half spent. This does not really give you the information you need to manage the budget.

To track spending against the budget, the project manager needs to understand the rate of spending on the project and the amount of work that is completed for the budget used. It is only by tying the budget back to the schedule in this way that the project manager will then be able to manage the budget effectively once the project starts.

Document any variance between actual costs to date and estimated costs based on the work that has been accomplished. You also need to determine if the variance is significant, and the consequences of missing the budget. If you do not have the ability to overspend your budget you will need to note the variance and look for other ways to reduce costs in other areas.

5

Project Manager

Forecast whether you will finish the work within expectations

Evaluate the remaining costs to see if the project will be completed within the original budget estimate. You may find that even though some items may cost more money than estimated, other items are costing less. It is usually the total costs that you have to manage.

6

Project Manager

Look for other budget trouble signs

After you reforecast your project you will determine if you are trending over your budget. At this point you should also take a step back to see if there are any other signs that you might be in trouble on the budget. For more information on potential budget problems see 4.1.2.3.1P Trouble Signs for the Project Budget.

7

Project Manager, Sponsor

Take corrective actions, if needed

If the budget is important, you are obligated to try to achieve it. You can use some of the cost control techniques described for larger projects. It is possible that you may have to ask for more budget. If the budget needs to be extended once, the team absolutely needs to meet the new expectations.

8

Project Manager, Finance

Manage the Budget Release Rate

It is possible that when you start the project the entire budget will be made available to you to spend as needed. However, as projects get longer, it is more likely that the budget will be made available at various increments in the project.

It is important to know the budget release rate since there may be a process to request the release of the next round of funding. If your project is trending over budget, you may need to request additional budget earlier than expected.

You don’t want to end up in a position where you are spending money on a project with no budget to cover the expenses.