Tips for Estimating and Creating a Budget

One of the most daunting tasks for a project manager is to estimate the budget accurately amidst the uncertainly in projects.

Here are our tips for estimating and creating project budgets:

1. Determine what components of the project need to be paid for. Make sure you have included the cost of the following:

• Staff: Time spent by your colleagues, colleagues in other departments, etc.
• Facilities and equipment: Computers, laptops, conference rooms, printing facilities.
• Indirect cost allocation: Is a percentage of indirect costs added to the project such as general and administrative costs?

In addition your budget should also include:
- Cash flow predictions throughout the entire project
- Income forecasts that are part of the project
- Contingency costs. The amount of contingency should be related to the level of risks in the project

2. Create a draft budget and discuss with the finance department for review and feedback.

3. Seek approval for the budget from the relevant departments.

4. Amend budget according to approval.

5. Keep track of usage of funds so you can optimise the funds you committed to.

6. Ensure systems and procedures are in place to track progress of the project against the budget.

7. At the end of the project, check final costs against the original estimates to make sure that the planned returns on investments have been achieved.