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How to manage your project budget: a step-by-step guide

budget project management

It’s no secret that a good project budget is key to successful project management. Along with completing projects on time and within scope, staying on budget is one of 3 essentials for a successful project.

But just 34%  of organizations say they always or mostly complete projects on budget — a drop from last year, where 43%  of organizations said they regularly completed projects on budget.

If your projects struggle to stay on budget, then this is the guide for you.

In this article, we’ll go step-by-step through creating an effective project budget, with actionable tips you can use.

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What is a project budget.

A project budget is the total cost of all the tasks, activities, and supplies associated with an entire project.

It’s one number that all stakeholders and participants agree to stick to as they complete project deliverables.

But a project budget is also a document that defines exactly how that magic number will be used.

By identifying how the project team will allocate spend across tasks and activities, managers and stakeholders can better track and control project costs.

Your project budget should be finalized before your project begins. In most cases, you won’t be able to increase your budget unless the project requirements change.

What does a project budget include?

Let’s take a closer look at precisely what a project budget entails.

Your project budget will cover several categories of costs. High-level breakdowns, like this one in a monday.com project budget template , are helpful, but you’ll need to break down the budget even further.

pie chart breaking down a project into several budget categories in a monday.com template

Here’s a closer look at the types of project costs you’ll need to include in your budget:

  • Labor cost:  salaries and wages, benefits, and payroll taxes
  • Materials:  equipment, software, and other supplies
  • Transportation:  travel costs and other logistics
  • Research and consultants:  experts or specialized teams like legal or development
  • Training:  courses, conferences, or facilitators for project-related skills and tools

Not every project budget will use these categories in the same way. For example, a construction project is likely to focus far more on materials than a merger or acquisition project. A technology implementation project might allocate more budget resources to training the workforce than on pure labor costs.

Why is a project budget so important?

Project budgets are essential communication tools. They promote visibility between the project team and key stakeholders.

As your project progresses, you’ll use your project budget to track how your actual cost stacks up to your estimated cost and convey that information to stakeholders.

If project requirements change, your budget may also change to reflect the new costs.

Here are a few other reasons why a project budget is so critical:

  • Project budgets reflect the progress and success of the project  by tracking budget usage as the project continues.
  • Project budgets help secure funding  by providing transparency into how budget resources will be used.
  • Project budgets help companies operate efficiently  by planning costs ahead of time.
  • Project budgets give insight into future project costs  by providing a historical record of the actual cost of the project.  

For successful budget management, it’s in your best interests to take your time and build out an accurate budget as part of your project plan. 24%  of project managers say unrealistic budgets negatively impact projects, leading to high costs or other problems.

But a carefully crafted cost estimate for your project budget will set you up for success from the get-go.

7 steps to creating and managing a project budget

Creating a project budget is an intensive process, particularly if you’re working on a long-term or high-budget project.

Some project management methodologies and frameworks outline preferred approaches or techniques for estimating a project budget. For the steps outlined below, we’ve aligned with the Project Management Book of Knowledge guidelines on project budgeting.

1. Outline your project tasks, milestones, and supplies

Before you can estimate costs for your project budget, you need to know exactly what your project is intending to accomplish.

Take a look at your project plan  to identify the tasks, milestones, and activities your team will need to complete. You can also collaborate with the project team or other stakeholders to make sure everyone is on the same page.

Use a collaboration tool like monday.com workdocs to compile everything in one place. While a document like this won’t serve as your final project budget, it’s a good way to collect everyone’s input and build a full picture of your project goals.

collaborative work document example form monday.com

At this point in the project budgeting process, you’re not estimating any real costs. You’re just making a list of everything you need to determine costs.

Compiling this list will also reveal other pieces of information you need to find. For instance, do you have a finalized project scope? A list of available resources?

As you undertake cost management  for your project, you may need to move between working on your project budget and other pieces of the project plan, like resource calendars and risk registers.

All of these documents impact each other, so you’ll need to keep an eye on all your project information to make your budget as accurate as possible.

2. Estimate your project budget

With your list of potential project costs in hand, it’s time to start estimating the cost of your entire project.

You can approach a budget estimate in 2 ways: top-down or bottom-up.

Top-down budgeting sets a total sum for the project budget and breaks it down into tasks and activities. Bottom-up budgeting estimates costs for each project task and adds them to find the total project budget.

Next, you’ll choose an estimating technique for each task. You can use the same technique for each task in your project, or you can use different methods based on the type of tasks you’re budgeting for.

If you’re using a project management tool like this one built on monday.com, you can create a budget column to record your cost estimate for each task or activity. You can also add formulas and automations to track your total budget across milestones, categories, and/or boards.

a project planning template on monday.com. A red arrow and box emphasize the "budget" column that's been added for each task.

Here are 3 common budget estimating techniques you can use for the activities on your task list:

  • Analogous estimating:  use a similar project to estimate costs. You can adjust this past project budget to account for variables or differences in the new project. This approach works best if you routinely do lots of similar projects, like technology installations or acquisitions.
  • Parametric estimating:  like the analogous estimating technique, parametric estimating uses data from past or similar projects. But instead of matching estimates for types of tasks, the parametric technique uses statistical methods and algorithms to account for variables and produce an accurate, data-driven project budget estimate.
  • 3-point estimating: this bottom-up estimating approach takes a weighted average of your best, worst, and most likely budgets for each task to produce the estimate.

Be sure to use the most up-to-date data you can find on costs in any category. Take other variables into account, too, like market conditions or potential business changes.

Once each associated task has a cost estimate, you can add up your total budget to present to stakeholders and your project team.

3. Get your project budget finalized

Once you have a clear project budget, you’ll need to finalize it with key people involved in the projects.

You may need to get official approval for your budget from people up your chain of command, but it’s just as important to get your stakeholders and budget managers on board.

This way, you can get feedback on specific parts of the budget to help your project run as efficiently as possible.

You’ll also gain full visibility into project costs and changes. If you’re managing your project on monday.com , you can even build high-level dashboards that provide accurate budget tracking.

4. Create a project budget tracker

No matter how you’re managing your project schedule and other elements, it’s smart to add a budget tracker to your project management system.

With a project tracker like this one, you can build a complete task list organized into milestones. Then, you can add columns to track the estimated cost and actual cost, as well as other important data.

monday.com advanced project tracker template

By connecting relevant data sources with monday.com integrations , you can create a real-time view of your project budget.

If you have a large project team, you can also set controls on your budget tracker so that only approved users can view or change the budget. This way, you’ll maintain control over the budget to ensure accuracy.

5. Monitor your project budget

It’s critical to monitor your project budget regularly.

By measuring actual costs against estimated costs, you can anticipate problems like scope creep or overspend early on. That gives you enough time to change course without disrupting project progress.

Despite the importance of regular budget tracking, 47%  of project managers can’t see their KPIs in real-time. On top of that, 50% of project managers spend more than a day manually aggregating data to get the information they need.

When you build your project budget tracker on monday.com, you can create a high-level dashboard to measure the actual versus estimated cost.

monday.com campaign budget tracker template

Here are a few other ways you can use monday.com to track your project budget:

  • Add formulas to project boards to calculate your budget deviations.
  • Set up automatic notifications in the event of overspend or other problems.
  • Create custom permissions for modifying the budget to further control spend.

6. Create a budget change process

Once a project budget is finalized, your goal as project manager is to stick as closely to that budget as possible.

Most of the time, you won’t be able to make changes to the budget unless the project scope or project schedule changes due to business needs.

When those changes arise, however, you’ll need to make sure that you address every part of the project that’s impacted by this change.

By creating interconnected boards and adding data sources on monday.com, you’ll be able to make changes across the project easily, keeping everyone on the same page at all times.

You can also define the change process your team will follow when they need to make changes. For instance, you might create a change request form, develop a checklist for updating the budget, and set up notifications for all stakeholders or budget managers.

7. Review and preserve your project budget report

Although you’ll be monitoring your budget throughout the duration of the project, it’s still worthwhile to conduct a budget review once the project wraps.

Just 48%  of organizations conduct end-of-project reviews, meaning most teams leave lots of insights on the table — insights that could benefit future project budgets.

During a project budget review, debrief on what went well and what didn’t with your budget. Make sure your final actual budget is accurately reflected in your budget report so you can use it for future project budget estimates.

Keep your project budget on track with monday.com

Creating and managing a project budget helps you track and control your spending throughout the duration of a project.

You’ll have full transparency into your budget and an easy way to see when you’re at risk of overspending or other budget problems.

By keeping an eye on your project’s spend, you can help it stay profitable for your business or team. Use this guide and a monday.com project budget management template  to start creating your next budget.

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Project Budget Management: Steps, Tips, Best Practices

Sean Collins

Project budget management is the process of planning, allocating, tracking, and controlling project resources throughout a project’s lifecycle.

But creating a project budget that works for you and your client is an art form. It’s the profitability of each project that will decide if your business sinks or swims. 💰

So in this post, you’ll learn how to create and manage a winning project budget like a pro.

What is a project budget?

A project budget is the total cost of all the tasks, activities, and materials associated with a client project.

A well-defined project budget helps you track the estimated costs versus the actual cost. And you can use it to track project expenses and reduce the likelihood of running out of resources or going over budget.

budget project management

Project budget vs. estimate—what’s the difference?

A cost estimate approximates what the project (or piece of it) will cost. The budget is the final cost that’s allocated to the project.

The estimate is more of a ballpark figure, and the budget provides hard edges. You can’t go over-estimate, but you can go over budget.

Typical project costs

Project costs will vary from business to business, so we’ll stick with the most common ones:

You may also want to consider adding a percentage to the final project budget to cover indirect costs—such as your business’s overhead expenses (rent, utilities, employee training, etc.) 

Generally, you can use a percentage range between 10% to 30% of the total direct costs to cover indirect costs—but this will vary from business to business.

Techniques for estimating a project budget

Before you go ahead and rush into creating a project budget, it’s wise to get familiar with the different budget estimation techniques.

There are a wealth of proven project estimation techniques , but here are the ones we think will be most helpful to you:

Expert judgment

Analogous estimation.

  • Top-down estimation
  • Bottom-up estimation

This one is pretty self-explanatory.

Start with your team and add use SMEs if you have knowledge gaps. Expert judgment is helpful when you don’t have historical data, or the project is simple enough.

But the biggest downside to this approach is the subjectivity—one person’s estimate could be wildly different from yours, for example.

This is where historical data can be useful…

Analogous estimating is a pretty easy way to determine how much something might cost.

You look at similar projects you’ve done and use them to create a ballpark estimate for the project.

But be careful; this is only a reliable method for estimating a project budget if you can access past project data and the project isn’t overly complicated.

Using Toggl Track , you can view past project data using the Report Dashboard .

You can access data at project and task-level such as:

  • Total tracked hours
  • Total billable hours
  • Total cost in labor

You can use this to put together quick estimates of costs and time.

budget project management

Top-down estimating

Top-down estimating looks at the high-level project scope and budget, avoiding digging into the nitty-gritty of the work to create a ballpark estimate.

It is a form of analogous estimating, where existing knowledge of similar projects is used in the estimation process to produce a ballpark figure for the total cost.

Top-down estimating can also involve the client setting the budget—this means it’s up to you to allocate funds to different tasks, phases, or deliverables.

Top-down estimating can be super efficient and straightforward but often needs more detail and nuance. Plus, if the client has a tight budget, it can be challenging to fulfill the goals and objectives of the project.

Bottom-up estimating

Bottom-up estimating considers the time, cost, and effort for each task within the project. It then adds it up to create an estimation for the entire project.

It’s best to use a combination of a  Work Breakdown Structure  (WBS) and historical project data when using this technique.

budget project management

This approach is much more detailed and accurate but can be incredibly time-consuming as it requires more input from your team.

Project budgeting tools

Here’s a list of tools you may find helpful when creating and managing your next project budget.

Work Breakdown Structure (WBS)

A Work Breakdown Structure (WBS) is a way to break down a project into smaller, manageable tasks. That way, you can estimate the cost of individual tasks or phases to create a far more accurate budget for your client and statement of work .

You can use our free WBS template for this.

budget project management

But creating a detailed WBS can take time—so it’s best to create one for projects when:

  • You fully understand the project requirements .
  • The client is committed to working with you and signing an SOW .

Learn more about the different types of project budget estimates in the ‘ When to create a project budget ’ section.

Spreadsheets

Using a spreadsheet to create a project budget is a practical way to organize and track your project’s expenses . 

Spreadsheets are great for creating and managing project budgets as they are versatile, efficient, and user-friendly.

Our WBS template incorporates project costs, so feel free to use that as your template.

Once the project has started, you can use our free project budget template to track expenses. The template focuses on tracking hours for specific tasks within a project and includes columns such as:

  • Estimates hours
  • Estimates cost
  • Actual hours
  • Actual cost
  • Over / under (budget)

I’d recommend you check out the ‘ Free Project Budget Template ‘ guide to learn how it works best.

budget project management

You can also incorporate a project time tracking tool into your project budget management process.

You can use Toggl Track’s Project Dashboard for your cost estimation process . You’ll get access to historical project data you can use to create quick estimates.

Screenshot of Toggl Track Project Dashboard

The Project Dashboard will let you dig into data such as:

  • Total time tracked
  • Total billable amount tracked
  • Task level time and costs tracked

Once the project is up and running, you can easily track expenses and assess profitability in real-time.

You can use the Project Dashboard to track the project’s expenses (labor and contractor costs) against the fixed fee you set.

budget project management

How to create a project budget in 7 Steps

A typical project budgeting process may look like this:

  • Define the project scope and client requirements
  • Break down the project into tasks
  • Create a cost estimate for each task
  • Build your project budget estimate
  • Add a project buffer and contingency fund
  • Get approval from the client
  • Track and monitor the project budget

Note:  for a more thorough step-by-step guide on cost estimates, please head over to our  project cost and time estimate guide .

1. Define the project scope and client requirements

The first step in managing a project budget is knowing what must be done to deliver the project successfully.

This should be done during the project’s discovery phase, and you will best be able to define the project scope once you’ve gathered all project requirements .

Defining the project scope will give you a lot of necessary info like:

  • What’s going into a project (resources)
  • What’s coming out of it (deliverables)
  • What needs doing (tasks)
  • How long will it take (timeline)
  • Everything the client is requesting

How to Gather Requirements for Project Success in 8 Steps

2. Break down the project into phases and tasks

The key to protecting any project budget is knowing the exact tasks you need to complete to deliver the project.

Once you’ve collected all project requirements and defined the project scope, you can break the project down into manageable phases and tasks.

The best way to do this is to use a  Work Breakdown Structure  (WBS). This will help you uncover everything you need to know to get the project over the line and protect the budget.

But what to list? What about the little tasks? How deep to go? Check out our guide ‘ Work Breakdown Structure: A Guide For Agencies ‘ to learn more.

3. Create a cost estimate for each task

Now that you know what tasks are involved, you can start understanding the time and costs associated.

Here’s an overview of different  project estimation techniques  for this step.

Say you’re using the bottom-up estimation technique. You can use the  WBS template  to build cost and time estimates for each task.

Alternatively, using  Toggl Track , you can use historical project data to help speed up this process. You can use the  Reports Dashboard  to analyze what went into them, including resources, time, and cost.

Screenshot of task breakdown inside of the detailed report in Toggl Track

This is especially great for any project work consistent in scope, hours, and effort required.

4. Build your project budget estimate

With your list of potential project costs in hand, it’s time to start estimating the cost of your entire project.

You can approach a budget estimate in three ways:

  • Using your experience
  • Using the WBS template provided
  • Use past historical data to create a quick estimate

But say you used the WBS template from above. You may have something that looks like the image below.

budget project management

Look at your final number and review it, and review it again. Check it for accuracy by speaking to your team and reviewing similar past projects.

5. Add a project buffer and contingency fund to protect profits

Not everything goes as planned, so expect the unexpected.

A project buffer will help account for anything that could go wrong within the project. It will be a much-appreciated cushion for minor issues and sudden changes.

Issues like:

  • Scope creep
  • Sudden changes 
  • Moving objectives
  • Increases in material costs

Note:  we’ll look deeper at some of the issues above and how to deal with them below.

Your project buffer will also cover any little expense you didn’t (or couldn’t) account for — the unknown unknowns.

How much of a project buffer should you add?

Experts recommend adding about 10% – 20% to your project estimate. Check out the video below for more tips on this.

The better solution to adding buffers to your project cost estimates is to mitigate the impact of project risks by estimating for it upfront.

This can be done by adding a 20% contingency fund to your estimate to account for change and risk.

Don’t build this into your estimate; add it as a separate line item. This helps set a precedent and educates your client that changes to scope equate to additional costs from the contingency fund.

This means you can say yes to your clients a lot more, with a small caveat that you’ll be using the additional budget for it.

11 Common Project Risks And How to Avoid Them

6. Get approval from the client

The last step in the project budget creation process. By now, you should have a project budget you’re happy with. So it’s time to get this sent to the client for approval.

If you’re creating a project budget as part of a proposal, remember to include the following:

Need a project proposal template? Download our free one  here .

After a client has reviewed your proposal/budget, listen to their feedback and make adjustments until you reach a budget that everyone can agree on.

Do clients often say your price is too high? Check out this video below.

7. Track and monitor the project budget

Once the project is underway, track project expenses against the budget to ensure you stay on track.

In the agency or freelancer world, this will typically mean keeping track of costs such as:

  • Your labor costs/team labor cost
  • Your time — aka your billable hours and actual costs
  • Your project expenses (materials, software, contractor costs, etc.)

If you’re comfortable with spreadsheets, you may want to use our  project budget tracking template  to manage the overall budget.

budget project management

But are spreadsheets your best option to control project costs ?

Probably not.

I’ve chatted with a few agencies and freelancers that use spreadsheets to track their time – and they  always  say how chaotic they are.

  • Files get copied
  • Some go “missing.”
  • Formulas are unintentionally edited
  • People don’t tend to fill them in all that much
  • You’re unable to quickly get insights you can leverage (more on this later)

Thanks to  time tracking tools , tracking project budgets have never been more manageable.

Unlike spreadsheets, many of the  best time tracking tools  come with features that help to automate and streamline the entire project budget-tracking process.

Using Toggl Track , you and your employees can quickly start tracking your time by entering a time entry description and hitting the timer button.

It takes a few seconds to switch the timer to a different task (especially if projects and tasks are already set up).

  • Type in your “time entry description”
  • Find your client
  • Select what “project” you’re working on
  • Start the timer

Once you or your team accurately tracks time against the project, you can use the  Project Dashboard  to track your progress against the project budget.

Project Time Estimates  lets you view whether you’re over on hours or on target based on the estimate you set. If you’ve exceeded the time estimate, the time tracked will turn red.

budget project management

The Time Tracking Chart will show a forecast for project completion based on the project estimate and the hours clocked for that project so far.

budget project management

The Billing Amounts chart shows the progress against a fixed fee amount (the project budget) set for the project.

budget project management

Below these forecasting charts, you will also see a bar and pie chart representing current data containing total clocked hours,  billable hours , and remaining hours (based on the project estimate).

budget project management

Want to see how profitable each project is?

Head over to the  Insights Dashboard —it’s designed to give you more details about the profitability of your projects  and  team members.

budget project management

You can better monitor a project’s budget using  Alerts in Toggl Track . You can set up Alerts to be triggered based on a time estimate or a fixed fee.

budget project management

When to create a project budget

You probably spend a lot of time creating proposals and going through an entire sales cycle, only to be told the client isn’t interested in working with you.

Want a hack to save you some time during this process?

Here are three different types of budget estimates you should consider:

  • Ballpark estimate  – The client needs to know if the project is possible, but you need more information to give a proper estimate. So you can do this by giving them a ballpark estimate of the project’s cost based on expert judgment or historical data ($80k-$140k).
  • Budget estimate  – Suppose the client is happy with the ballpark estimate. In that case, you may ask for more information about the project to assemble a more accurate estimate and plan using a WBS or historical data. Your revised estimate may change to $90k-$130k.
  • Statement of work estimate – Assuming the client is still good to go, the final step in the estimate refinement is creating a detailed WBS using your team and historical data to make your final budget estimate. This is the cost you should include in your SOW. You may adjust your estimate to $100k + a 20% contingency fund.

What is a Statement of Work? A Guide for Beginners

Why do projects go over budget?

Your project budget will inevitably hit a snag no matter how well managed. So let’s look at some top reasons project budgets go overboard and what you can do to prevent them.

Additional client requests

It’s easy to get tied up in client-pleasing.

They ask for another web page–sure! They ask for another revision–you got it!

If you aren’t charging for the “little extras” you’ll risk going over budget.

You will inevitably face them—but knowing how to deal with additional requests is critical here.

Here are three ways to best handle additional requests:

It’s healthy to set boundaries with clients. Charge for little extras, or acknowledge the request and let them know it will cost extra. Communicate with them, and both parties will be better for it.

Reaching Your Limit: How to Manage Design Change Requests

Sudden changes

Unexpected changes can take a bite out of your budget.

These additions could be something that wasn’t included in the initial planning or a sudden need to adapt due to unforeseen circumstances.

Unplanned changes can include:

  • Lacking specific resources and materials
  • A team member leaving the project
  • A team member was sick
  • Vital tasks that were forgotten and, as a result, never added included in the budget

Protecting yourself from people leaving your business or being off sick is hard. 

But you can use as much past project data and as you can get your hands on to protect budgets and profits better.

This may mean reviewing old project plans, past cost estimates or better understanding the potential risks of each project .

All this information will help you make better decisions on budgeting for and managing your projects .

Poor planning

Yes, poor planning can lead to a poorly planned budget. Another disaster averted by Captain Obvious.

In all seriousness, this is a crucial point to stress.

60%  of projects have a scoping document, defined methodology, and undergo risk management.

This means that 40% of projects don’t have a solid plan. That’s 400 projects out of 1,000. 💀

The best way to prevent this is to plan, schedule, and review each project. Preferably with multiple team members to get several sets of eyes on it.

Here’s a project schedule laid out in  Toggl Plan .

budget project management

Comb through your  project’s plan  carefully,  assessing time ,  project costs , and risks as you go.

Double-check and triple-check your project before you waste boatloads of time and money.

A session or two of reviewing a project plan will allow you to spot potential problems ahead of time and ensure everything’s water-tight.

The moving target

Goals and objectives moving constantly can de-rail any project.

You may find yourself in a situation where your trying to get a deliverable over the line, but the client keeps moving the goalposts. 

Meaning you spend more time on each task than needed.

How do you deal with this? 

  • Stop everything you’re doing immediately.
  • Get clarity from the client.

Stop all work on the project immediately and get clarification from the client asap. You’re going to burn through the budget if not. 

Send them an email or give them a call and say something as simple as:

“In the interest of keeping this project on track and within budget, I need some help clarifying our goals and direction moving forward.”

You must let them know that you are mindful of their budget and time.

Spend time revisiting the project scope and SOW (your safety net) and ask the client, “are these still our goals and objectives?”

If not, then you can acknowledge the new direction and charge accordingly.

Project budget best practices

Wondering how some of the pros manage their budgets?

We reached out to several agency owners and project managers about what they do to keep a project budget on track. 

Here are some of our favorite tips:

Be transparent with the client

James Nesbitt of Myth , an app and software development agency, puts client transparency at the top of his list.

“ A big part of project budget management for us is being incredibly transparent with our clients from the outset and again once a project is underway. 

This all comes down to your onboarding process and taking the time to cover all project aspects extensively with the client to ensure that both parties are on board with expectations about the required deliverables. “

The best way to tackle this is to:

  • Collect and fully understand the requirements of the project
  • Breakdown the project into phases/deliverables using a WBS
  • Document all project phases/deliverables in a statement of work
  • Get the client to agree that anything out of scope will be charged extra
  • Create a project timeline with all tasks and milestones that can be shared with the client

Following the steps above means you’re not going into a project afraid of additional requests that will likely lead to a spiraling budget.

  • Create a risk management plan

One of the most common challenges in project management is fighting off project risks from consuming your budget.

What do common project risks look like?

Here’s a quick summary of project risk examples for you skimmers:

Common project risks will inevitably creep toward a project budget, so a risk management plan is crucial.

This is what Simon Bacher of Ling App has mastered to keep his projects on track:

“ Without a comprehensive risk management plan, unexpected risks get out of hand, which will only inflate project costs over time… I create and implement a yearly risk management plan based on historical and projected risks. “

The best way to defend yourself against project risks is to:

  • Understand common project risks and how to avoid them
  • Perform a risk assessment with your team

Collaborate with your clients

Who knew that communicating with clients would be beneficial to keeping a project budget on track? 🤡

John White of Complete White Label , a link-building and content marketing agency, stresses the importance of working with your clients from the outset.

“ Setting these targets collaboratively with our clients has led to fewer budget overruns since it improves our ability to plan efficiently, allowing us to allocate resources and time better, ultimately narrowing the budget. “

What can you do to get the client involved?

You should both work on the following:

  • Defining project expectations
  • Creating a detailed project plan
  • Building a project timeline with goals and milestones

Create your project plan and timeline internally, then share it with your client for feedback.

Use Toggl Plan to create a visual timeline to share with your clients.

budget project management

Shared timelines are read-only. This means your client cannot edit the timeline in any way. They can, however, view the entire timeline together with tasks and milestones.

What Is A Project Communication Plan And How To Create One?

Have regular check-ins with the client

Communication with your client shouldn’t stop when the project has started.

One strategy Ryan Mckenzie of Tru Earth uses to manage a project budget is periodic project status check-ins with key stakeholders.

“ These check-ins helped me identify scope creep or other issues that could lead to the project being over budget. During these check-ins, it’s essential to assess progress and ensure everyone is on the same page regarding any changes in scope or timeline that could increase costs. “

How often should you check in with your client?

Honestly? It depends. 🤷‍♀️

There are two main factors to consider: 

  • The length of the project
  • The size of the project

A multi-year project might only require a status report every quarter or every six months. But a project that lasts six months? Monthly reporting is probably a good cadence.

While keeping management or your client informed of the progress is essential, project reports often take time. So creating them too often might be considered wasteful. 

But then there is the second element to consider—the project’s size.

Straightforward projects like creating a one-page flyer probably don’t need much reporting. 

But something as complex as a website build, mobile app, or branding campaign may require regular updates. So writing a project report every month or quarter is worthwhile. 

But don’t go overboard with project progress reports. Too much project reporting can be problematic. You don’t want to drown yourself with admin work when your time could be better spent on profitable work. Try and apply some common sense.

How to Write a Project Status Report [Template Included]

Create a detailed statement of work

A statement of work (SOW) is probably the most important document in any project.

It helps to:

  • Provide a framework for communication
  • Manage and avoid common project risks
  • Act as the baseline for project post-mortems
  • Establishes goals, objectives, and deliverables 

An SOW is a document that Rocco Brudno , a content and SEO consultant, is all too familiar with.

“ Clients often have different expectations of what to expect once a project starts. So getting project details ironed out from the start can significantly reduce the variables that create out-of-scope work and ensure everyone is on the same page. “

In disputes or disagreements, your SOW is the document you should refer to if you think your client is requesting work out of scope.

Track project progress and expenses

Tracking project progress using project management software is another way to help keep project budgets on track.

Maria Harutyunyan, Co-founder & Head of SEO at Loopex Digital , champions this approach:

“ One strategy that has helped me keep client project budgets on track is utilizing project management software to ensure visibility and accountability across the project lifecycle…having an overview of everything related to a single client project makes it easy for everyone involved in the team (including clients) to stay updated on progress. “

Toggl Plan allows you to organize tasks on a Kanban board format and provides a clear overview of task statuses.

budget project management

The Kanban board helps you to protect your project budget by allowing you to:

  • Reorder and prioritize upcoming tasks with our simple drag-and-drop interface.
  • Prioritize tasks during sprints without focusing on time estimations.
  • Segment all tasks based on their current status for the best project overview.

Or, you can switch to a project timeline view that can be used to schedule and track a project from start to end.

budget project management

The timeline view helps you to protect your project budget by allowing you to

  • Get a clear overview of who’s doing what and when.
  • Visually track tasks from start to finish as they get done.
  • Schedule tasks without conflicting with other projects, time off, and public holidays.
  • Create color-coded milestones and optionally make them visible across projects to meet deadlines.

budget project management

Toggl Plan integrates seamlessly with Toggl Track  to help you better track your project costs and protect your budget.

budget project management

Turning projects into profit

Money no longer gets to pull your puppet strings. It’s long overdue that  you  control your money.

For more reading on cost estimation and budgeting in project management, go check out our guide on  estimating the cost of a project .

Want to learn more about managing projects?

Check out the following guides:

  • How to Maximize Your Project Profitability
  • How to Track Project Expenses (And Stay Within Budget)
  • Project Monitoring: The Beginner’s Guide
  • Project Cost Management: The Ultimate Guide
  • What is a Statement of Work? A Guide for Beginners
  • How to Create the Perfect Project Management Plan

Sean Collins

Sean is a Content Marketer at Toggl. He's been involved in SEO and Content Marketing since 2017. Before working for Toggl, Sean ran SEO at a digital marketing agency—so he's all too familiar with time tracking and project management.

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Project Budget Management 101: Manage Your Finances Successfully

Lucija Bakić

December 1, 2023

The three essential activities for successful project management are resource planning, project scheduling, and project budget management .

This guide will discuss everything you need to know about budget management. Keep reading to learn more about budgeting challenges, best practices, and the top software solutions available.

Key Takeaways

  • Efficient project budget management includes implementing robust change and risk management to improve project deliverables and overall agency finances.
  • Various management methods can be applied depending on your agency and project type. These include traditional vs agile budgeting, bottom-up vs top-down estimating, and value-based budgeting.
  • Common project budgeting mistakes and challenges include ineffective scope management, inaccurate estimates due to lack of project data, and minimizing the importance of communication and transparency between project stakeholders.
  • Project budgeting software can help you make your project budgeting more efficient with real-time data and automated processes. Consider all-in-one tools to reduce IT overhead and integrate your workflows.

Understanding Project Budget Management

Project budget management is a crucial part of project management. It includes careful planning and estimation, efficient resource allocation, and continuous management throughout the project life cycle. Research shows that only 36% of organizations are likely to deliver projects within budget ( PM Survey 2019 ). What are some of the main challenges associated with successful project budget management, and how can you try to address them?

  • Scope Creep: Scope creep is one of the main causes of budget overruns and failed project delivery in professional service agencies. Though there is no way to prevent changes to scope fully, you should ensure that you have the right systems to forecast potential challenges and their results. This is also known as scope management.
  • Inaccurate Estimations: As with maintaining project scope, you’re unlikely to achieve perfection when estimating tasks. However, to come as close as possible, referencing reports that compare estimated and actual time can be invaluable. Additionally, consider implementing a slack period for every estimation — over-delivering is better than under-delivering.
  • Communication Gaps: Poor stakeholder communication can drive up project deadlines and cause unexpected costs. This includes inefficient feedback processes with clients and information gaps in internal teams. To address this, you can set up best practices for progress updates, such as gathering all task communication in one place.

STREAMLINE YOUR COLLABORATION WITH PRODUCTIVE’S PROJECT VIEWS AND TASK MANAGEMENT

Efficient budget management can reduce costs, build agency-client trust, and ensure better planning and forecasting for future projects.

What Are the Different Methods of Project Budget Management?

We can distinguish between multiple methods for managing budgets, which can be suitable depending on your industry, project type, and team composition. We’ll review some of their features, benefits, and downsides in the below sections.

Traditional vs. Agile Budgeting

Traditionally, income and costs are usually determined annually, at the beginning of the fiscal year. This means budgeting is more rigid, with less opportunity to react to sudden internal or external changes. Agile budgeting, on the other hand, is an interactive process that assigns resources in smaller increments. It supports collaboration and separates the purposes of budgeting into three distinct processes, all of which are handled flexibly: setting targets, forecasting key performance indicators, resource allocation, and cost management.

Top-Down Budgeting

Top-down budgeting uses experiences from similar past projects and breaks up the estimating process from the whole to the granular elements of the project. In practice, this would mean that the lead manager estimates the overall project cost, focusing on major tasks, then gives the estimates to managers handling specific teams, and so on. The benefits of this process are:

  • Overall budget costs can be estimated with more accuracy
  • Errors in estimation for individual tasks usually don’t cause many issues
  • Overlooking smaller tasks also doesn’t impact the budget significantly

Bottom-Up Budgeting

In bottom-up estimating, the granular level of the project is estimated first, not by managers but by team members – for example, a designer would provide hours for how long it takes to create a design and a developer would then estimate the time for coding. The overall project costs are estimated by considering the costs of resources and indirect costs such as administrative costs, contingencies, etc. The benefits of the bottom-up method are:

  • More accurate estimating of individual tasks
  • Including all members of the project team can increase employee engagement
  • Can simplify the process by diving it between multiple people

Value-Based Budgeting

Value-based budgeting considers the potential value that investments or expenses may bring. It addresses the following main questions:

  • Does the product or service provide value to customers, employees, or other key parties?
  • Is the value provided by the product or service greater than its expense? If not, are there alternative justifications for the incurred cost?

The benefits of value-based budgeting are that it encourages strategic thinking and focuses on the end result, enabling innovation and growth. However, it might be challenging to implement in professional service industries, where the most valuable resources are intangible — employees and the skills they provide. Additionally, value propositions can be subjective, as they can depend on individual judgment.

How Can I Create a Project Budget?

From defining project scope and identifying tasks to selecting the most suitable budgeting methodology, a couple of key processes provide a solid foundation for effective budget management. These include:

1. Project Scope and Objectives : Clearly outline what the project aims to achieve and set boundaries for what is included in the scope and what is not. 2. Tasks and Activities : Break down the project into individual project activities and tasks. This breakdown, often represented in a Work Breakdown Structure (WBS), helps comprehend all the smaller constituents that make up the overall budget. 3. Budgeting Methodology : Find the best way to approach your budgeting depending on project type: from top-down, bottom-up, value-based budgeting to a hybrid of different strategies. 4. Stakeholder Approval : Present the budget plan to stakeholders for approval to ensure it aligns with the desired outcomes. 5. Monitoring and Iteration : Continuously monitor the budget throughout the project life cycle and update it to reflect unforeseen internal or external changes.

Learn more about optimizing your project management budgeting:

What are Some Common Budget Management Mistakes?

Some common budget management mistakes include underestimating costs, ignoring risk assessments, and failing to update the budget. Underestimating costs can happen when data from previous projects isn’t being collected or analyzed – in particular, consider the importance of reports such as estimated vs actual hours.

A similar proposal from the past might have said “this is going to take us 100 hours”, but the reality might have been 60 or 160 hours. That reality is what’s going to drive the new proposal or the lack of even trying for that business. So if the utilization for that project was 160% and we know we can’t get 160% of the price for the project again for the next client, then there’s no reason to step into that deal.

Lore Hamilton , Program and Scrum Manager at Rietta

Read the full story : Rietta Leads Its Distributed Team With Productive

It can also be caused by a desire to close a deal with the client at all costs — but be wary of under-pricing your services. It can set a bad precedent for the future, and even make the client think that your services are less valuable. When it comes to risk assessment and budget updating, both can happen due to a lack of real-time data, as well as time and resource constraints. Another possible factor in project budget mistakes is inadequate communication with the project team and stakeholders.

What are Some Tips for Managing a Tight Project Budget?

Here are some tips to effectively handle tight project budgets:

  • Project Prioritization: According to PMI, projects that are aligned with business strategy are 57% more likely to succeed, 50% more likely to be finished on time, and 45% more likely to stay on budget. This is particularly important in a multi-project environment, where it’s largely impossible to put the same amount of work into every project. Consider the Pareto Principle, where 80% of value comes from 20% of work, and apply it accordingly to your capacity planning .
  • Cost-saving Strategies: Consider ways to save on costs without affecting your quality. This usually includes reassessing your expenses and finding areas that you can scale down without negatively affecting your operations. For example, decreasing travel expenses, or switching your workflows to an all-in-one management tool to cut down on IT overhead.
  • Continuous Review: By regularly analyzing the budget and updating forecasts, project managers can anticipate and mitigate potential financial issues before they escalate into major problems. This proactive approach allows for timely adjustments in strategy or resource allocation, helping to maintain control over costs. Clear communication with the client is equally important, as it ensures transparency and alignment of expectations.

How Can I Communicate Budget Changes to Stakeholders?

Client transparency is one of the most important factors of successful project delivery. Yet, according to surveys, only 56% of clients believe they have an honest and transparent relationship with their agencies (Havas). Without good communication, the likelihood of getting repeat business and good word of mouth significantly decreases.

I think that in project management there’s a tendency to focus solely on profitability, but it’s inevitable that projects will go over budget, and that’s ok. However, it’s important to have transparency on where that stands, and Productive gives us that visibility.

Amy Nichols , Director of Operations at Seven2

Here are our three tips for ensuring more effective collaboration:

1. Establishing stakeholders: A project manager in a professional service agency will work with multiple stakeholders — ensuring stakeholder buy-in, especially across senior management, is necessary for easier resource reallocation and better project delivery. Additionally, establish the primary point of contact with the client to speed up the feedback process. This is necessary to help the project manager get the resources and support they need to manage their project successfully. 2. Ensuring continuous contact: The client should regularly monitor the project, ideally through weekly meetings. Even if the client doesn’t request regular reports, the agency project manager should encourage them regardless. Yet, surveys show that only 15% of agencies send weekly reports (AgencyAnalytics). Regular feedback benefits both parties by fostering urgency, allowing early resource requests, predicting and avoiding potential roadblocks, and promoting collaboration.

PRODUCTIVE GIVES YOU IN-DEPTH INSIGHTS INTO YOUR FINANCIALS ACROSS MULTIPLE PROJECTS AND CLIENTS

3. Considering goals: When it comes to drafting the terms of the contract, the manager needs to consider potential risks in advance. Clients tend to underestimate the time, budget, and effort needed for project tasks, so accounting for slack at the outset is helpful for further communication. It can help avoid situations where clients are surprised or disappointed by actual project progress and facilitate requests for additional resources or funding. See more : Mastering Agency Project Management: The Ultimate Guide

How Can I Track Project Expenses?

The best way to track project expenses is to utilize a software solution that streamlines repetitive processes and helps deliver accurate data. Some key features to consider are: budgeting, client billing, project resource planning and forecasting, and essential project management capabilities with billable hours tracking. According to recent research, only 5% of agencies are largely dependent on spreadsheets, with a vast majority (52%) using disparate tools with some extent of integration, and only 14% utilize an integrated platform that enables real-time analysis ( SoDa & Productive ). Using an integrated tool to support your budget management can:

  • Streamline Processes: With comprehensive software, you can support the entire project life cycle on one platform, from winning deals to billing your clients.
  • Enhance Collaboration: Cross-functional teams, in particular, can profit from using an integrated platform, as it allows simpler knowledge sharing and decision-making.
  • Centralize Data : All-in-one tools consolidate all project-related data in one place, which enhances accessibility and data accuracy.

We used to have a project management tool, a time tracking tool, a support tool, a way we handled opportunities and sales-driven processes. Those were all separate tools that we had, and it wasn’t good. It also meant that all that data was being lost every time we switched between tools, or we had to find a way to normalize the data between them. And now, the fact that it’s all in one, it’s really a game changer.

BRYAN CASLER , VICE PRESIDENT OF DIGITAL STRATEGY AT 4SITE INTERACTIVE STUDIOS

What Are Some Tools That Can Help Me Manage My Project Budget?

Some different types of tools that can be used to manage your budgets are:

  • All-in-one tools  centralize all project management and budgeting processes, enabling seamless integration of budget planning, tracking, and reporting within a single platform.
  • Financial management tools are specialized software designed to streamline financial health and budgeting, with minimal support for other agency operations such as project or task management.
  • Billable hours trackers help manage billable and non-billable hours to support accurate client billing and revenue recognition.

Let’s look at the best options from each category and compare their benefits, downsides, and customer reviews.

1. Productive – The Best All-in-one Agency Management Software for Effective Budgeting

Productive is a comprehensive agency management software for agencies of all shapes and sizes. It’s tailored to support your daily operations with various features, from time tracking and project management to extensive resource planning and budgeting.

productive helps minimize costs by balancing your agency’S resources

Key features include:

  • Time Tracking : Productive helps manage billable and non-billable hours with its integrated time management. Options include an integrated timer that can be started from tasks or desktop, retroactive entry, and automatic creation based on booked employee hours. Use time approvals to decide whether hours are billable or not.
  • Financial Management : Productive helps you get full control of your project budgets, including hourly, fixed, retainer, or hybrid. Forecast your overruns, monitor budget burn, and check your profitability in real time with Productive’s Profitability view. Set up automated warnings for spending to make sure you’re always on track.
  • Billing & Purchase Orders : Productive’s budgeting supports client invoicing and expense management with purchase orders. Create and send brand-friendly invoices directly from the platform, and set up automatic payment notifications to ensure you’re paid on time. With purchase orders, you can manage external expenses and delivery dates.
  • Reporting : Productive provides more than 50 agency-focused templates for simplified reporting. You can add specific parameters with custom fields and convert your numbers to easy-to-underst

Additional features include: Project Management , Resource Planning , Sales , Docs, Automations . Integrations include: Xero, QuickBooks, HubSpot, Breathe, Zapier, Slack, Jira, and more.

Why Consider Productive as Your Project Budgeting Software?

Productive can be a great choice if you’re looking to optimize and streamline your budgets. Thanks to its integrated approach, you can standardize your workflows on one platform to get the full picture of your project and resources. Thanks to its advanced reporting and financial forecasting, you can ensure that you’re making informed project decisions. Client communications are also simplified, as you don’t need to spend hours to create reports. Finally, you can ensure continuity with previous financial practices thanks to Productive’s integrations with popular accounting tools, such as QuickBooks and Xero.

Because of the information that’s available now, we’re doing more because Management is looking at the information and dissecting it even further. “Why did those 10 projects make a 42% profit, and that one made 20%?” Before using Productive, we could never understand where differences in profit were coming from.

Patric Osburn, Service Operations Manager at Quintica

When to Consider Alternatives

If you’re looking for a specialized tool that supports one part of the project management budgeting process, Productive might not be your best solution. However, consider that investing in an all-in-one solution might be a more time and cost-effective solution in the long term.

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2. Sage Intacct – A Complex Financial Management Tool

Sage Intacct is a financial management software from Sage Group, the leading provider of ERP solutions . It is designed to support a wide range of industries and businesses, including construction, retail, healthcare, and professional services.

  • Real-time financial reporting and analysis
  • Streamlined bill entry and payment automation
  • Streamlined internal communication with Sage Intacct Collaborate
  • Security and compliance features

SOURCE: SAGE INTACCT

The Benefits & Downsides of Sage Intacct

Sage Intacct is a robust financial management solution, and it can be suitable for larger enterprises. However, as the tool is not geared towards professional services only, but a large variety of industries, you might find that not all of the features suit your workflows. Additionally, users frequently comment on Sage Intacct’s price point and learning curve. For a more streamlined and user-friendly option, an all-in-one tool might be better.

3. Toggl Track – A Streamlined Time Management Solution

Toggl Track is a specialized time tracking software that streamlines budgeting with accurate timesheets and simple-to-access time management data. Key features include:

  • Simple timesheet creation and exporting
  • Project profitability tracking
  • Exportable data for easy client invoicing
  • Integrations with various productivity & project management tools

SOURCE: TOGGL TRACK

The Benefits & Downsides of Toggl Track

The biggest benefit of Toggl Track is its lower price point and simple user interface. This makes the tool a suitable choice for smaller teams and startups that are just starting to think about billable hours management and key agency metrics. However, Toggl Track lacks the advanced support that is necessary for teams with more complex projects and financial needs. Therefore, fast-growing agencies might quickly out-scale this solution.

How Can I Prevent Project Budget Overruns?

The key to preventing project budget overruns is to identify early warning signs such as frequent changes in project scope, delays in key deliverables, or escalating costs for certain tasks. These indicators require immediate attention to prevent minor issues from turning into significant problems. Strategies for mitigating overruns include extensive initial budget planning and regular monitoring of expenses against the budget. Another tip is maintaining a contingency reserve:

It is common practice for project managers to ask for some percentage of the overall budget, such as 10% , to be used as contingency reserve.

Source: PMI

It’s crucial to consider and implement a change management process, as this is one of the primary causes of budget overruns. This involves evaluating the impact of any change request on the project’s budget and timeline and only approving those that are essential or add significant value. This can be streamlined with project management software – for example, Productive’s Resource Planning lets project managers reallocate their resources in real time and check the impact on budget and profit margins.

ALLOCATE YOUR HUMAN RESOURCES WITH PRODUCTIVE’S REACTIVE RESOURCE PLAN

Using Project Management Budgeting to Improve Project Outcomes

Effective project budget management significantly enhances project outcomes by aligning financial resources with strategic goals. Insights on actual cost vs cost estimates can help you make better decisions for your agency’s financial health, address the weak points in your processes, and get accurate budget estimations.

We ended up terminating contracts with two of our oldest clients after only a few months of using Productive. We thought that we were at least at zero with them, or that we had some small earnings, but it turned out that we were losing money because the money they paid us did not cover salaries, fixed overhead per hour, and variable overhead per hour.

Ilija Brajković , CEO AT Kontra Agency

Good project budget management also ensures that your current and future engagements are more successful. Delivering higher quality project deliverables within the project estimate timeline leads to satisfied project stakeholders. This can help you renegotiate your hourly rate or gain new business opportunities from positive word of mouth.

The Best Practices for Project Budget Management

To summarize, effective managing of your project budget can help you improve current and future project performance, driving overall agency growth. The primary best practice is ensuring frequent stakeholder communication to foster transparency and collaboration. Then, regular forecasting, budget review, and updating can ensure you’re never caught off guard. Allocating contingency funds can help your risk management efforts and promote proactivity. Finally, leveraging software solutions as a tool can significantly enhance the efficiency and accuracy of these processes. To achieve this, book a demo with Productive, the all-in-one management software that drives project success.

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Top 7 Project Budget Management Tools: Optimize Your Project Budgeting

Top 5 business budgeting software solutions for agencies, tracking profitability: how to track billable hours in professional services.

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Integrated Project Portfolio Management

Project Budget Management: A Step-by-Step Guide in 8 Easy Steps

Do you often find yourself confused about keeping your project budgets under control? Imagine being able to foresee potential budgetary obstacles and proactively address them, leading your project to completion with minimal financial hiccups. 

It’s all about project budget management. 

At the heart of every successful project lies a well-structured and diligently managed budget, and with the proper techniques, you can understand your financial resources, allocate funds strategically, and make informed decisions to prevent overspending and maximize your project’s potential.

We have prepared this comprehensive guide on project budget management, breaking it down into eight easy-to-follow steps that will transform your budgeting into a smooth, effective process.

Let’s get started!

Table of contents

What are project budget components, what are the types of project budgets, what are the key benefits of effective budget management, why is project budget management critical, what is top-down budgeting, what is bottom-up budgeting, what is zero-based budgeting, what is activity-based budgeting, what is parametric estimating, what is analogous estimating, what is three-point estimating, what is earned value management, #1 initiating the budgeting process, #2 estimating project costs, #3 creating the project budget, #4 budget approval and stakeholder communication, #5 implementing the budget, #6 monitoring and controlling project expenses, #7 risk management and budgeting, #8 project closure and budget evaluation, what tools to use for project budget management, how do you maintain a budget balance in your project, what is project budget management.

Project budget management is the art and science of planning, estimating, allocating, and controlling the financial resources required to achieve project objectives . 

It serves as a financial roadmap , guiding project managers and stakeholders through the entire project from initiation to completion. 

Let’s dive into the fundamental components of project budget management.

A project budget comprises various interconnected components forming a comprehensive financial plan. 

The first is direct costs , which are expenses directly tied to the project’s deliverables and activities. 

Direct costs can include:

  • Labor: The wages or salaries of team members and workers involved in the project. This includes the cost of their time and effort dedicated to project tasks.
  • Materials: These can vary depending on the nature of the project, such as construction materials, software licenses, or manufacturing components.
  • Equipment: The cost of purchasing, renting, or leasing specialized equipment or machinery necessary for completing project tasks.
  • Space and facilities: The expenses of renting or leasing office space, warehouse, or other facilities needed for project work.

Indirect costs are expenses that indirectly contribute to the project’s success. They support the overall project but cannot be directly attributed to specific activities. 

Indirect costs can include:

  • Administrative overhead: Costs related to executive functions such as project management , office management, accounting, and general administration.
  • Utilities: Expenses for electricity, water, heating, cooling, and other utilities required to operate the project workspace.
  • Licenses and permits: Costs associated with obtaining licenses, permits, or certifications necessary for project compliance and operations.

In addition to being classified as direct or indirect costs, expenses can also be further categorized as fixed or variable costs:

  • Fixed costs remain constant throughout the project, regardless of the project’s activity level. Examples include fixed salaries, rent, and insurance.
  • Variable costs are based on the project’s activity level. For instance, materials and labor costs may vary depending on the work completed or the quantity of products produced.

Of course, unforeseen events and risks are inherent in any project. Contingency reserves set aside a portion of the budget to address unexpected challenges that may arise, acting as a buffer to mitigate potential financial impacts on the project.

Project budget management can also include management reserves , which are additional budget allocations that the project manager alone keeps to tackle unforeseen changes that might impact the project’s scope or objectives. These reserves are held separately from the project’s baseline budget and are used at the project manager’s discretion.

Handy guide: You can use our project management key elements guide to discover other fundamental aspects of the PM domain. Additionally, consider obtaining a project management certification to validate your expertise in budget management.

Understanding project budget components lays the foundation for exploring the different types of project budgets and their unique applications.

Different projects may require unique budgeting approaches based on their nature, scope, and duration. 

Here are some common types of project budgets:

Exploring the types of project budgets will pave the way to understanding the key benefits that effective budget management can bring to your project’s success.

Mastering project budget management offers a multitude of advantages for the entire project ecosystem:

  • Resource allocation: It ensures that the right people, materials, and tools are available at the right time , minimizing waste and maximizing efficiency.
  • Cost control: It empowers project managers to monitor expenses closely, identify cost overruns early on, and take corrective actions to prevent budget derailment.
  • Decision-making: It provides valuable insights for decision-making, helping project managers prioritize tasks , choose appropriate solutions, and balance project constraints effectively.
  • Stakeholder confidence: It instills stakeholder confidence, fostering trust and support for the project’s success.

Understanding the key benefits of effective budget management sheds light on the crucial importance of implementing project budget management in every project.

Project budget management is the lifeblood of successful project delivery. Without it, projects risk facing various challenges, including:

  • Financial uncertainty: Inadequate budgeting can lead to financial surprises, delays, and the project being halted due to insufficient funds.
  • Scope creep : Without a clear budgetary framework, projects become susceptible to scope creep, where uncontrolled changes in scope lead to increased costs.

Pro tip: Here is a guide to the top 5 causes of project creep and how to avoid them created by PMI.

  • Stakeholder dissatisfaction: Poor budget management may lead to damaged stakeholder relationships and reluctance to invest in future projects.
  • Project failure: Ultimately, the lack of adequate budget management can lead to project failure, tarnishing the reputation of the remote project team and organization.

Now that we have grasped the fundamentals of project budget management, let’s dive into the various standard budgeting methods and techniques used to optimize financial planning and control in projects.

What are the common budgeting methods and techniques?

When managing project budgets effectively, having the right budgeting methods and techniques in your arsenal can make all the difference. 

This section explores the most widely used and practical budgeting approaches to help you precisely plan, estimate, and control project finances. 

Project budgeting methods

Let’s dive into the first one: top-down budgeting.

Top-down budgeting is a high-level budgeting approach where the overall budget is determined by top-level management or stakeholders without involving lower-level project managers or teams in decision-making. 

While this method is quicker and more straightforward, a lack of information from those in higher-level positions means that the budget can require further adjustments to ensure that the budget is aligned with project-specific needs.

Example: In a large organization, the executive team allocates a specific amount for marketing initiatives company-wide without consulting individual marketing teams on their particular needs.

In contrast to top-down budgeting, bottom-up budgeting involves collaborating with project teams and managers to create detailed budgets. 

Each team provides their estimates, which are then aggregated to form the overall project budget. 

Example: For a construction project, each department provides detailed estimates of labor, materials, and equipment costs. The project manager aggregates these estimates to create a comprehensive project budget, ensuring accuracy and input from those directly involved.

This method offers greater accuracy and buy-in from those directly involved in the project but may be time-consuming.

Zero-based budgeting requires justifying every expense from scratch, regardless of previous budgets. 

Project managers must provide a rationale for each cost element, promoting a thorough review of all expenses. 

Example: Before starting a new product development project, the project team evaluates each expense, such as research, design, and testing costs, from scratch, ensuring that every budget item is justified based on project requirements and objectives.

While this method prevents budgetary waste and ensures a well-justified budget, it can be resource-intensive and therefore unsuitable for certain projects.

Activity-based budgeting allocates resources and funds based on specific project activities or tasks. 

This method helps identify the financial impact of each activity and allows for a more focused allocation of resources where they are most needed and is particularly beneficial for projects with diverse tasks and resource requirements.

Example: A construction company uses activity-based budgeting to allocate resources separately for foundation work, structural framing, and interior finishing, taking into account the unique costs and requirements of each activity.

As we explore main project budgeting techniques further, it’s crucial to dive into the estimation process—an integral aspect of budget creation. The first method is parametric estimating .

Parametric estimating involves using historical data and statistical relationships to estimate project costs and uses predefined parameters, such as cost per unit or hour, to quickly calculate budgets. 

It is particularly helpful for projects with repetitive elements and well-established historical data.

Example: A software development team estimates the time and resources required to build a new AI-powered feature by analyzing data from similar past projects and calculating the average time it took to complete similar functionalities.

Analogous or top-down estimating relies on past projects’ data to estimate the current project’s budget. 

Project managers use similarities between previous and current projects to make educated guesses about the required resources and costs. 

While this offers quick estimates, the accuracy can vary depending on the project’s similarities.

Example: In a marketing campaign, project managers use data from past campaigns with similar target audiences and objectives to estimate the current campaign’s budget, considering lessons learned from previous projects.

Three-point estimating uses three different estimates for each task: the best-case scenario (optimistic estimate), the worst-case scenario (pessimistic estimate), and the most likely scenario (realistic estimate). 

These values are then used to calculate the expected cost, providing a more robust estimation that accounts for uncertainties and risks.

Example: In a construction project, the time required to complete a wall construction process could be estimated as follows: optimistic estimate – 4 weeks, pessimistic estimate – 8 weeks, and realistic estimate – 6 weeks.

You can combine this approach with other estimation and budgeting methods.

EVM is a powerful technique that uses project scope, schedule, and cost to assess performance. It compares the work completed to the planned value, allowing project managers to monitor cost and schedule variances and predict future performance trends.

Example: If a construction project is 50% complete according to the planned schedule and budget, but the earned value analysis shows it should have been 60% complete regarding work accomplished and budget spent, the project is behind schedule and over budget.

Now that we have explored the common budgeting methods and techniques let’s dive into a comprehensive step-by-step guide to implementing project budget management effectively in your projects.

How to implement project budget management in 8 steps?

Congratulations on reaching the heart of our guide! 

Now that we have explored the critical concepts of project budget management and common budgeting methods, it’s time to implement our knowledge. 

How to implement project budget management?

With these eight easy-to-follow steps, you’ll be equipped to create, track, and manage project budgets with confidence and finesse.

Let’s start with the initiation of budgeting processes.

Before diving headfirst into creating a project budget, you should create a solid foundation during the initiation phase. 

The first order of business is to gain a crystal-clear understanding of the project’s objectives and scope. 

A quick tip: You can use our guide about project charter creation to speed up the project initiation phase. 

This step is crucial as it sets the direction for budget planning and ensures that financial resources are allocated to align with the project goals .

Ask essential questions, such as:

  • What specific deliverables does the project aim to achieve?
  • What are the project’s overall goals, and how will success be measured?
  • Are there any budget constraints or limitations that need to be considered?

A well-defined project scope will act as a compass, guiding your budget decisions and preventing scope creep, which can lead to unexpected financial challenges later in the project.

To clarify things, you may also gather historical financial data from similar past projects as a reference point for estimating costs. 

Don’t forget to consider external factors that might influence the project’s financial landscape, such as inflation rates, market trends , and regulatory changes. 

Pro tip: Budgeting is a collaborative effort that requires input from various stakeholders and experts. Assemble a competent budgeting team comprising project managers, financial analysts, subject matter experts , and key decision-makers. 

As the budgeting process is initiated, the next vital step is estimating project costs to ensure accurate financial planning and resource allocation.

Now that we have a solid foundation from the initiation phase, let’s consider estimating the project costs using the chosen budgeting approach. 

Here are the best practices to follow:

  • Detailed Work Breakdown Structure: Create a comprehensive WBS for granular cost estimation.
  • Involve subject matter experts: Collaborate with SMEs and team members for reliable input (decide their duties and responsibilities based on RACI ).
  • Use historical data: Refer to past projects’ data to validate estimates.
  • Three-point estimation: Employ optimistic, pessimistic, and realistic scenarios for robust estimates.
  • Consider external factors: Evaluate inflation and market trends for accurate estimates.
  • Account for contingency: Allocate a reserve for unforeseen events to maintain budget stability.
  • Regular review and update: Continuously revise estimates based on project progress and changes.

Handy template: You can easily create a project structure with our WBS template .

Remember that every project comes with a level of uncertainty and risk. 

To safeguard the budget from unforeseen challenges, it’s essential to include contingency reserves. Also, consider identifying risks and uncertainties and quantifying their potential financial impact during cost estimation. 

Another handy template: You can use our risk management plan template to mitigate risks promptly.

Allocating appropriate contingency reserves demonstrates prudent financial planning and enhances the project’s ability to weather unexpected circumstances.

Congratulations! You’ve arrived at a pivotal stage: creating the project budget . 

Let’s start with the key differences between a project budget and a project estimate (they serve different purposes):

  • Project budget: A detailed financial plan outlining each component’s specific costs. Guides resource allocation and expense control during project execution.
  • Project estimate: Approximate costs based on available information and estimation methods. Provides a high-level view of expected costs before finalizing the budget.

Now we know the difference, let’s focus on budget creation.

To create a robust project budget, break down the costs for each project activity identified during the scope definition phase using the WBS. 

Be thorough in considering all direct and indirect costs associated with these activities. Use data from the cost estimation process, validate with subject matter experts, and evaluate historical data from past projects to enhance accuracy. 

Consider the availability of resources, such as skilled personnel, equipment, and materials, and distribute them efficiently across the project’s timeline. 

Identify resource bottlenecks or potential conflicts early on and adjust the budget allocation accordingly to ensure smooth project progress.

Important: If you are ready to create your project budget, start with our project budget spreadsheet template to avoid starting from scratch.

As you create the budget, be mindful of any limitations imposed by stakeholders, funding availability, or organizational policies. Carefully assess the impact of these constraints on the project’s scope and deliverables and make necessary adjustments to align the budget with the project’s priorities .

Practical tip: To assist you in assessing all the limitations in projects already running, consider using PPM Express as a project portfolio management tool that provides you with a “big-picture” view. 

By visualizing resource data and tracking project progress, PPM Express empowers project managers to make informed budgetary decisions, identify potential cost overruns, and optimize resource allocation for successful project delivery.

After the creation of the budget comes a new crucial phase: obtaining budget approval and communicating with stakeholders. 

First of all, before presenting the budget, tailor your communication approach to cater to the preferences and needs of your stakeholders. 

Some stakeholders may require a high-level overview, while others prefer a more detailed breakdown. Consider using visuals such as charts, graphs, and tables to make the information understandable and engaging.

When presenting the budget, provide context by highlighting the project’s objectives, scope, and anticipated outcomes. 

Pro tip: Clearly outline how the budget aligns with project objectives and supports the project’s success. If stakeholders raise concerns about specific budget items, be open to exploring alternative solutions or adjustments if warranted. 

Stakeholders may have questions, concerns, or requests for clarification regarding the budget. Be prepared to address these queries with confidence and transparency. 

Demonstrating flexibility and a willingness to collaborate fosters trust and strengthens stakeholder confidence in the budgeting process.

To secure approval, emphasize the budget’s alignment with the project goals, thoroughness of the estimation process, and steps taken to address potential risks and uncertainties. 

After the budget approval, with the financial roadmap in hand, it’s time to put your meticulously crafted project budget into action. 

Let’s explore the essential steps of implementing the budget, starting with establishing financial tracking mechanisms.

You might implement tools and systems to record and track financial transactions, expenses, and resource usage in real time. 

Platform recommendation: Consider using PPM Express as a resource management and PPM software to estimate all the aspects of implementing the project in a “one-window” view.

Having precise project budget tracking mechanisms gives project managers and stakeholders visibility into project spending, enabling proactive decision-making and timely interventions to address budgetary concerns.

Regularly compare actual expenses against the budgeted amounts for each activity or work package and analyze any variances and investigate the reasons behind them.

If deviations from the budget occur, take prompt action to understand the root causes and implement corrective measures. Communicate budgetary challenges with relevant stakeholders and collaborate on solutions to keep spending on track.

During the project, unexpected events or changes may impact the budget. As a project manager, you must be prepared to handle these deviations effectively.

  • Contingency reserves: Utilize established funds for unforeseen challenges or risks within the predefined scope.
  • Change control process: Follow the procedure for significant changes and seek stakeholder approval.
  • Constant evaluation: Continuously assess budget assumptions and update accordingly for changes in scope or resource needs.

With the budget in action, the focus shifts to monitoring and controlling project expenses to ensure financial adherence and optimal resource utilization .

As your project progresses, vigilant monitoring and control of project expenses become paramount to the success of your budget management efforts. 

Let’s explore the essential practices for monitoring and controlling project expenses, starting with regular budget reviews and performance analysis.

Conducting regular budget reviews is a fundamental aspect of effective budget management. 

Set a schedule for regularly reviewing the budget during the project and use this time to compare actual expenses against the budgeted amounts and analyze any variances.

Identify spending trends and patterns to gain insights into areas that may require attention.

If you identify significant variances that could jeopardize the project’s financial health, implement corrective actions promptly. 

To handle unexpected situations, consider the following steps:

  • Assess the impact: Analyze the reasons behind the discrepancy and its effect on the project budget and timeline.
  • Engage stakeholders: Keep stakeholders informed about the situation and involve them in decision-making to address the issue.
  • Reallocate resources: Reallocate resources from lower-priority tasks to cover the additional budget expenses.
  • Seek approval for changes: If the cost overrun exceeds the available contingency reserves, follow the change control process to seek approval for budget adjustments from relevant stakeholders.

As we maintain a vigilant watch over project expenses, it’s crucial to integrate risk management strategies with budgeting to safeguard against potential financial challenges.

Risks are inevitable, so anticipating and proactively managing potential budgetary risks is crucial to maintaining the financial health of your project.

To effectively conduct risk management with a comprehensive identification of potential budgetary risks, you should engage with your project team, subject matter experts, and stakeholders to brainstorm potential risks that could impact the project’s financial aspects.

Common budgetary risks include:

  • Inaccurate cost estimations lead to budget deviations.
  • Price fluctuations in materials or services.
  • Changes in scope or requirements affecting resource allocation.
  • Delays or disruptions in project execution lead to increased expenses.
  • Economic or regulatory changes impacting project costs.

Once you’ve identified budgetary risks, develop strategies to mitigate their impact. Work closely with your team and stakeholders to brainstorm creative and practical approaches to manage these risks effectively.

Pro tip: You can use our risk register template to clarify, systematize, and control all the project risks.

Potential risk mitigation strategies include:

  • Building contingency reserves in the budget to address unexpected events.
  • Conducting thorough market research to anticipate potential price fluctuations.
  • Implementing project controls to monitor expenses and prevent cost overruns.
  • Establishing strong vendor relationships and negotiating favorable contracts.

Conducting risk assessment workshops and collaborating with experts to gain deeper insights into risk factors.

Integrate risk management into budget planning throughout the project lifecycle. Consider identified risks during budget creation, allocate contingency reserves, and adjust allocations accordingly. 

Practical tip: You can simplify your risk estimation process with our risk assessment template .

Revisit risk assessments during budget reviews and adapt mitigation strategies, ensuring financial resilience and proactive decision-making.

Remember, effective risk management is not about eliminating all risks but identifying, understanding, and mitigating them to ensure your project stays on track financially should issues occur.

As the project nears its closure, evaluating the budget becomes paramount, integrating risk management insights to gain valuable lessons for future financial planning and project success.

Congratulations! You’ve successfully navigated the intricacies of project budget management, and your project is nearing completion. 

However, before bidding farewell, there’s one critical step remaining: project closure and budget evaluation.

Compare the actual project budget expenses against the budgeted amounts to determine the extent of variance. Identify any areas where the budget exceeded or fell short of expectations. 

Analyze the variances between the actual expenses and the budgeted amounts for each project component. Look for trends or patterns in budget deviations to understand the root causes.

If there are significant positive variances (under-spending), investigate the reasons behind them to identify cost-saving opportunities that can be applied in future projects.

For negative variances (over-spending), explore the factors contributing to them and assess the effectiveness of your risk management and budget control strategies.

Lessons learned are invaluable for continuous improvement in project budget management. Document your budget insights, including successful budgeting practices, areas for improvement, and key takeaways from the budget evaluation process.

Reporting tip: If you’re looking for a reports template to control your budgeting performance, PPM Express has already prepared 200+ Power BI reports.

Capturing these insights systematically provides a knowledge repository that can guide future projects, enabling project managers and teams to make informed budgeting decisions and avoid common pitfalls.

After understanding the essential steps to implement project budget management, it’s time to explore the tools that enhance efficiency and effectiveness in financial planning and control.

Project budget management can be significantly streamlined and enhanced with the help of various software tools and technologies. 

These project budget tools offer features and functionalities that simplify budget planning, tracking, and reporting, making the process more efficient and transparent. 

Here are the best apps for budget tracking and managing:

  • PPM platforms: Utilize PPM Express to manage budgets and resources across multiple projects and platforms, gain portfolio -level insights, and align budgets with strategic goals.
  • Spreadsheet software: Use Microsoft Excel or Google Sheets for budget planning, tracking, and variance analysis. Visualize budget data through charts and graphs for stakeholder presentations with PowerPoint or Google Slides .
  • Project management software: Employ Microsoft Project , Smartsheet , or Monday.com with budget management features. Set budgets, track expenses, and collaborate in real time.

Pro tip: Don’t know how to choose the right project management software? We’ll help you with our step-by-step guide about the process.

  • Accounting software: Utilize QuickBooks or Xero for precise financial record-keeping, expense, and budget tracking, and reporting in complex projects.
  • Expense management apps: Opt for Expensify or Zoho Expense to easily track and approve team expenses, ensuring accurate budget accounting.
  • Budgeting and financial planning software: Leverage Workday Adaptive Insights or Planful for collaborative budget creation, scenario modeling, and real-time forecasting to optimize resource allocation and adapt to changes.

Pro tip: ChatGPT can also serve as a valuable tool for managing project budgets. Take a look at our comprehensive ChatGPT prompts library , which includes prompts for budget and resource management.

As we explore the project budget tools available, let’s also discover key strategies to maintain budget balance and ensure financial success throughout the project’s lifecycle.

Maintaining budget balance throughout a project’s lifecycle is essential for its success and financial health. 

These key strategies maintain budget balance in your project, empowering you to achieve your project goals while staying within financial boundaries.

  • Real-time budget tracking and monitoring: Utilize budget management tools for real-time expense tracking and comparison with the original budget. Regularly review financial reports to address deviations promptly.
  • Clear budgetary goals and objectives: Establish transparent budgetary goals that are aligned with project scope and objectives. Communicate these goals to team members and stakeholders to foster accountability.
  • Regular budget reviews and forecasts: Conduct periodic budget reviews and forecasts to anticipate financial needs and identify potential risks. Use the data to make informed decisions on resource allocation and budget adjustments.
  • Resource optimization: Efficiently allocate resources to avoid unnecessary expenses and bottlenecks and assess resource utilization to ensure a balanced project execution.
  • Contingency planning : Maintain contingency reserves within the budget to handle unforeseen events and proactively assess risks and have contingency plans in place to manage budgetary challenges.
  • Change control and scope management: Implement a robust change control process and manage project scope effectively. Evaluate the impact of scope changes on the budget and seek approval from stakeholders before incorporating them.

To streamline your budget management efforts and maintain budget balance effortlessly, there is no need to utilize a budgeting spreadsheet, consider using PPM Express, a powerful project portfolio management tool. 

With PPM Express, you can optimize resource allocation, monitor budget expenses, and proactively manage risks to ensure your project’s budget stays on track.

Take charge of your project’s financial success with PPM Express !

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10 tips for a successful project budget

Table of contents, what should your project budget preparation include, tip 1: don't neglect the investment analysis phase, tip 2: diversify funding sources, tip 3: value your in-kind contributions, tip 4: divide your budget, tip 5: involve your colleagues, tip 6: find the right price, tip 7: do not underestimate deadlines, tip 8: monitor your budget, tip 9: communicate with your team, tip 10: maintain your budget spreadsheet, project budget, a key factor in project management.

Managing a project budget is a key stage of project management . It deals with the delicate part of expenditure and financial resources.

As a project manager, your goal is to ensure that all of your projects are completed. And, if you are unable to manage funds efficiently, you will risk not completing your projects.

Here are 10 tips for a successful project budget , as well as the advantages of using the right software to manage your project budget efficiently.

What is a project budget?

A project budget is part of a financial process that can be divided into three phases:

  • cost estimation ,established by referring to actual costs of similar projects if possible, it is linked to the estimated timeframe,
  • project budgeting , budget is allocated according to the breakdown of the project,
  • cost control . “NB: a popular calculation method used in project management is Earned Value Management or the S-curve. It is used to measure the progress of a project and anticipate the next steps by comparing forecasts with actions that are being carried out and their associated costs.” As a financial and realistic representation of your project, a project budget consists of listing, identifying, and classifying :
  • the revenue you have acquired or is in the process of being acquired.

Planning and elaborating a strategy in advance will allow you to set a relevant project budget along with steps to review it constantly. This can then be used to monitor your project and see if it is being carried out successfully. Thus, among his missions, a project manager must:

  • assess the feasibility of the project (market study, make an estimate of the budget and available resources, etc.),
  • set objectives ,
  • breakdown projects and schedule tasks,
  • allocate human and material resources ,
  • identify risk factors,
  • plan projects and schedules,
  • create quotations and allocate project budget ,
  • present to management for validation, and make corrections if necessary,
  • monitor the progress of the project,
  • adjust schedules and budgets in real-time.

Here we focus on step 7, which, given its place, is a pivotal step between the strategic and operational phases .

Thanks to this forecasting tool , you can visualize the feasibility of your project upstream, make adjustments, and reach your targets or the expected margin. A project budget can be used to:

  • help in the decision-making process,
  • consider several hypotheses for action, more or less ambitious,
  • anticipate your future outcome,
  • confront your desires with economic realities,
  • apply for funding or partnerships,
  • present a credible and viable project,
  • regularly analyze and compare your PO with actual expenditure and income,
  • adjust your project as needed.

Like any budget, it is divided into two columns: expenses and income, which are then divided into several categories. Expenses Expenses are calculated first, with the revenues being adjusted on the other side according to their amount. Among the direct costs :

  • the sum of the salaries of internal human resources in proportion to the number of (planned) hours dedicated to the project,

Calculation: gross salary + payroll and employer charges x hours worked x number of months or weeks (depending on whether it is a monthly or annual budget). This is called a "full-time equivalent".

  • Operating expenses (procurement, subcontracting),
  • the cost of external labor multiplied by the duration of the intervention,
  • the cost of purchasing or renting equipment specific to the project (e.g., supplies, paper, renting a training room),
  • costs related to project communication (graphics, printing, costs related to dissemination, etc.),
  • travel, meeting costs, etc.

Indirect costs (for the cost of resources allocated to several projects, not exclusively to the project in question, shared by means of distribution keys) : Here is an example:

To allocate the cost of rent, take the average occupancy time of the premises according to the size of each project, and distribute it as a percentage. If project 1 occupies the space, 20% of the time, project 2, 30% of the time and project 3, 50% of the time. Then 20% of the charges for rent, electricity, water, etc. should be allocated to project 1 and so on.

  • Miscellaneous charges: water, electricity, telephone bills, rent and rental charges, insurance, maintenance of premises and equipment,
  • management costs: salaries for services that are transversal to the company or outsourced (legal department, accounting department, security),
  • financial expenses: bank loans, interest payable, premiums,
  • communication costs,
  • product sales,
  • service fees,
  • partnerships,
  • self-financing,

Cost control

“NB : a popular calculation method used in project management is Earned Value Management or the S-curve. It is used to measure the progress of a project and anticipate the next steps by comparing forecasts with actions that are being carried out and their associated costs”

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10 tips to create a successful project budget

Here are 10 tips to help you create a successful project budget:

The investment analysis phase includes a calculation of the estimated return on investment (ROI), but also a forecast study of the cash flow . This is used to value the projects in the portfolio (PPM or Portfolio Project management, in the case where several projects are piloted in parallel).

A project budget can be used to diversify the funding sources (public, private, etc.) of associations that deal with requests for subsidies. Moreover, it can be used to reassure each investor. A share of self-financing is often added to make up the difference between the resources and the planned expenses to show the company's involvement. It is impossible to look for a margin (not-for-profit nature), your target should simply be financial equilibrium. Moreover, an investor is not intended to help you generate profits, he or she is there to help you achieve a goal. Regardless of the type of business involved, planning a project and diversifying the sources of funding can help offset the eventual withdrawal of one of them.

Estimate your "valued" expenses (lending equipment, rooms, volunteering). This is important for associations applying for a grant, or companies requesting the participation of a partner. You will often have to translate the amount requested into a percentage of the total project. If the room is valued, the total budget goes up, but the share requested from the funder goes down as a percentage.

Rather than budgeting over the lifespan of the project, try to do it monthly. This will allow you to have a clear overview of your project budget and be able to adapt it according to the challenges you may face (change of suppliers, delays). There is also less margin for error. For example, you can use an Excel sheet with the major phases of your project in the header columns, the months on separate lines and the costs of each stage at their intersection. It will then be easy for you to add up the total estimated budget. You can also proceed by creating your project budget according to the type of expenditure. At each budget review, it is important that you quickly identify losses and profit.

As a project manager, you are in charge of operations. However, you may not always be aware of all the elements that must figure in accounting forecasts. Nor will you be aware of the expenditure and needs of other departments that contribute to the operational phase of the project (marketing, research and development, etc.).

A collaborative dimension is another success factor in project management. You must involve different colleagues when creating a project budget in order to merge the practical knowledge and activity of each member together. It is strongly advised against delegating this task to an accountant. The administration and the field must walk hand in hand.

It is quite normal to underestimate or overestimate your expenditure.

Overvaluation Contrary to what you may read or hear, do not inflate the expenses. A small margin of safety (+ 5%) for uncertain expenses is allowed, but generally speaking, it is better to stick as close as possible to your actual forecasts. Instead, it is recommended to set aside a cash reserve so that you don't have to worry too much about equipment failure or increased expenses, for example.

Some businesses prefer to add a line entitled "management fees" equivalent to 10% of the total budget at the bottom of the table. Undervaluation Likewise, you should not underestimate your expenses. A restricted budget will quickly turn into a source of problems and conflicts between several tasks. In the project implementation stages, analyze risk factors to avoid this type of situation.

Time is money . If you are planning to launch a product too early, postponing it may explode your budget (extension of an emailing campaign, cancellation and postponement of the reservation of the event venue, etc.). Furthermore, if you ask your employees to estimate their future workload, be aware that they will tend to be overly optimistic. You should add a 20% safety margin to the time they estimate they will spend on each task.

It is a way to track expenses and the time spent by each team member on each task. Then, compare the estimated costs with the actual costs to anticipate what will happen next.

As a good manager, you know that the success of a project does not only depend on good project management. It is also based on the skills and commitment of your employees to satisfy clients.

Thus, internal communication, especially around the project budget and its evolution, will :

  • stimulate collective intelligence ,
  • decompartmentalize skills ,
  • merge talents ,
  • improve relationships within the team,
  • harmonize workloads ,
  • make employees feel secure,
  • rule out many risk factors associated with human resources (accidents, disengagement, work overload, etc.).
  • 6 tips to improve your internal communication

Do not create your project budget spreadsheet on Excel or use project budget templates. If you are creating your project budget spreadsheet on Excel, you need a solid accounting background to think about all the of expenses and know where to put them.

Moreover, it is not recommended to use project budget templates because each project is unique, and you may deal with complex projects that may not be able to adapt to pre-configured templates. Whether you use Excel or more sophisticated software, keep track of your calculations' data, so you can go back and understand how you arrived at a specific result.

What software can you use to manage your project budget?

Wrike is a cloud-based project management software designed to help project managers plan projects using templates and assign teams to collaborate on them. With this fully transparent tool, project managers can set tasks, subtasks, deadlines, and milestones. Moreover, they will have a variety of visual tools at their disposal, such as Gantt charts and Kanban boards to give them a global overview of project updates with color-coded tasks, assignment details, and real-time statuses. Wrike also allows project managers to monitor their budget over the course of the project to stay up-to-date on any budget variances and manage their impact.

With this fully transparent tool, project managers can set tasks, subtasks, deadlines, and milestones. Moreover, they will have a variety of visual tools at their disposal such as Gantt charts and Kanban boards to give them a global overview of project updates with color-coded tasks, assignment details, and real-time statuses.

Wrike also allows project managers to monitor their budget over the course of the project to stay up-to-date on any budget variances and manage their impact.

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monday.com is a cloud-based work management software that project managers can use to manage project budgets.

Thanks to its system of customizable tables, project managers can manage tasks and sub-tasks using a visual and intuitive tool. Once projects are identified, it is possible to assign each of them with the required resources and budget.

This project management tool goes one step further, by providing time management features (to meet the deadlines of your projects) and by offering different views of your tables, with a Gantt chart for example.

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Netsuite is a cloud-based enterprise management software designed to help SMEs manage their core business processes.

With this solution, project managers can make estimates on how much a project will cost and set cost and billing budgets accordingly.

This will also allow them to determine whether a project is on track financially to detect and resolve unexpected situations, like scope creep, milestone changes and project overruns.

With NetSuite’s Project Costing you can:

• monitor project performance

• drive profitability

• evaluate costs

• get strategic insights

As you have understood, it is very important to give the necessary time and attention when developing your project strategy. You must take into account several factors, including time, financial resources, objectives, and human resources.

The solutions presented above will allow you to streamline your organization, improve your management and the monitoring of your projects. It's up to you to find the one(s) that suits you best. Let us know how you manage your project budget!

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Tactical Project Manager

The Practical Guide to Project Budgeting

  • by Adrian Neumeyer

Creating a project budget may be overwhelmin, if you’ve never done it before.

In this article I’ll show you the process. Afterwards you’ll be able to set up a solid budget on your own.

Let’s get started.

The first question I’ll answer is:

What goes into a project budget?

  • labor of internal resources
  • labor of external resources

Goods and services

  • materials used for production
  • services purchased
  • consulting or legal fees
  • accommodation
  • visa fees and services charges

Investments

  • computer hardware
  • intellectual property

The major part of every project budget will be labor cost.

Labor cost can be broken down into:

  • cost of internal resources
  • cost of external resources

First you need to estimate the effort of every person involved in the project, both for internal and external resources. What you need to prepare is a spreadsheet with the number of days per month each resource works on the project. If you don’t have an appropriate template, I recommend you get my project budget template .

So, how do you figure out the effort for each member of your team? You talk to each person and ask: “What will be your effort for completing X?” Your team members usually know best how much time they need (read also: how to set deadlines in a project ).

A word of warning: Be skeptical about estimations. Some people tend to overestimate while others underestimate the amount of time required. I like to challenge people when my gut tells me the numbers are unrealistic.

Asking people for an estimate doesn’t always work. Some tasks are too complex to make a quick estimate. In those cases you need to break those tasks into pieces and estimate each piece separately.

Here’s another estimation method which works well for repetitive tasks: Assume you want to manufacture 1000 cars. Instead of trying to estimate total effort in one go, you estimate the time required to produce a single car. Then you multiply that number by 1000 and you have the total time required for the entire production cycle.

Recommended article: Read my guide on estimating effort hours in projects .

From labor effort to labor cost: how to make the calculation

Now you have estimated labor effort. How do you get from effort (measured in days) to currency values? You have to put a price tag behind each day and make a simple multiplication:

labor cost = # effort in days x $ cost per day

Now you probably ask yourself: “How do I know what to charge for each day?” That’s a question either HR or your internal accounting team can answer. Companies usually have tables with cost rates for their staff, broken down by department.

For external resources like freelance developers or consultants, you usually have a fee agreement which states the rate charged per hour.

Cost of goods and services

Next, let’s have a look at project-related expenses for material and services.

Does your project require any goods or particular services to be able to reach the target? Then you need to include those in the budget plan.

Examples for goods:

  • material required for prototyping (e.g. in engineering)
  • low-value items (e.g. office supplies)

Examples for services:

  • rental fees
  • legal advice

Travel expenses: They can eat up your budget quickly

Travel cost can easily amount to hundred thousand dollars or more, if the project involves a lot of traveling to faraway countries. Therefore, you must do a good job in estimating the scope and frequency of business trips.

Travel expenses are:

  • food and drinks
  • services charges payable to travel agencies

Estimate the number of business trips and set a limit of how many people are going to be on the trip. This makes it easier to forecast travel expenses. Remember also that business trips are no fun events. Only people who are absolutely required should be allowed to go on the trip.

Example: Let’s say you’re running a project at your Mexican subsidiary . Then you can estimate your travel requirements in the following fashion:

Trip #11: Initial scoping. 5 people who will stay for 1 week.

Trip #2: Business workshop. 12 people who will stay for 2 weeks.

Trip #3: Functional test: 12 people who will stay for 2 weeks.

Trip #4: GoLive: 10 people who will stay for 2 weeks

Figure out airfares to your destination as well as hotel rates, put everything into a spreadsheet and do the multiplication.

Also note that accommodation and flight fees can vary significantly depending on the season. Go to Google Flights or Priceline.com to check flight and hotel prices. Your calculation should thus not only consider current rates but expected rates at the time of travel.

Investments: are you getting machinery, computers, or anything of the like?

Investment goods – also called assets – are items a company uses for its production or provision of services. Think of expensive machinery, vehicles, but also computers and software.

Examples of investment goods:

  • software licenses

Investment expenditures are handled slightly different in a project budget: the purchasing value isn’t recorded as a one-off expense but distributed over the lifetime of the asset.

Example: For the latest project, your company buys a new truck worth $400’000. The truck is purchased in May 2018 and it’s going to be used for 7 years. Now, we don’t record the $400’000 as an expense. Rather, we have to spread the amount over the truck’s total lifetime, which is 7 years or 84 months. The monthly expense is $400’000 / 84 = $4’762. That’s the number that must go into your budget.

Should your project budget include taxes?

No matter what your project is for, almost always some purchases have to be made. Think of materials or services that are going to be used in some form or another. You hire a consultant, you purchase physical items like screws or cables. It doesn’t matter. And companies have to pay taxes, most importantly VAT (value added tax). The question you have to answer is whether the project budget should show the cost with or without taxes.

In 99% of cases you should exclude tax. Why? Most companies are able to recover tax on goods purchased. Therefore the tax will not permanently reduce a company’s profit and thus shouldn’t be factored into the budget. In case a company is unable to recover taxes (for whatever reason) for a specific item, you should add the tax amount into your budget. Your accounting team can answer the question whether to include or exclude tax. Just ask.

Create the project budget overview

Finally let’s create the project budget. You take the cost that you’ve estimated in each of the categories and put them into a spreadsheet.

If you haven’t checked out my project budget template , I recommend you do it now. People have told me it has saved them hours when setting up new projects.

Read next: How to keep track of project costs

I have written an article on tracking project expenses , which I recommend if project cost management is new and scary to you. It’s actually not that complicated — you just need to learn the process.

Adrian Neumeyer

Hi! I'm Adrian, former Senior IT Project Manager and founder of Tactical Project Manager. I created the site to help you become an excellent project leader and manage intense projects with success!

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How To Create and Manage a Project Budget Without Stress

No matter your level or seniority, budget management is an essential skill to master.

budget project management

Kelly Ostrowercha,   Freelance Project Management Leader and Process Optimization Specialist

  • project planning

As a project manager, you'll often be tasked with overseeing budgets and keeping an eye on each expense. Sometimes, you'll even have a hand in the initial scope and budget planning. Other times, you'll need to work within a predetermined budget, stretching it to accommodate your project's needs.

No matter the circumstance, effective project budgeting and project cost management are crucial for the success of any project. A well-planned project budget can help teams stay on track, avoid overspending, and ensure that resources are used efficiently. 

In this guide, we'll look at how you can create and manage a project budget, tackling everyday challenges along the way.

What to consider when setting a project budget

As a project manager, setting and managing a project budget is one of the critical and challenging tasks you'll undertake. Many factors need to be considered when developing a budget, such as:

  • Defined project scope : A clear scope helps determine the activities and resources needed, impacting the overall budget. Ensure the scope is well-defined and agreed upon by all stakeholders before setting the budget.
  • Stakeholder expectations : Strive for a realistic budget that meets stakeholder expectations . Keep everyone informed about the budget's development, communicate any changes, and provide regular updates on the project's financial status.
  • Resource requirements : Consider whether your project needs higher-skilled or additional resources to meet tight deadlines. Assess the time each person requires to achieve project deliverables.
  • Project timelines : Evaluate the time needed to complete each task and its impact on the overall budget. Longer timelines may lead to higher costs, while shorter ones may require more resources, resulting in a higher budget.
  • Risks and contingency : Identify potential risks and plan for contingencies. Include a contingency fund in the budget for unexpected project expenses. Also, keep this fund a secret, as it's your safety net to address issues when they arise.
  • Communication requirements : Don't forget to factor in meeting or workshop time, communication within tools, or client communication that may exceed initial estimates in your communication plan . Allocate budget per resource for time spent on communication and focused deliverable work.

Managing the project budget in agile vs. waterfall

Agile and waterfall project management are the two popular methodologies used to manage projects. While both methods have their differences, setting and managing a project budget holds the same importance, regardless of the method used. 

Let's take a quick look at some of the differences in setting and managing budgets within each methodology.

Agile project management

In agile project management , the budget focuses on delivering value to the customer through each sprint. The budget is split into smaller increments, allowing for flexibility and adjustments as the project advances. Regular monitoring and budget adjustments help adapt to project scope or requirements changes.

The main challenge lies in producing an accurate cost estimate (or cost baseline), as the iterative nature of the methodology may cause scope and requirements to change, impacting the budget.

Waterfall project management

In waterfall project management , the budget is based on the project's estimated cost and deliverables. The budget is divided into phases and milestones, each with a pre-set budget. The project manager oversees regular reporting and monitors progress against predetermined milestones and phases, ensuring the project remains on budget and schedule.

The primary challenge is delivering the project within the allocated budget, regardless of changes in project scope or requirements .

The key to success is to choose the methodology that best suits the project's needs and to ensure that the budget is realistic and meets stakeholders' expectations. Regular monitoring and communication of the budget status can ensure that the project is delivered within the allocated resources and to the satisfaction of all stakeholders, regardless of the methodology used.

Five tips to scale down a budget that won’t deliver

If you find yourself in a situation where the project budget isn't sufficient to cover the entire scope, don't worry—there are several steps you can take to address the issue and still ensure a successful outcome:

1. Identify cost-saving opportunities

Carefully examine the project to uncover ways to trim costs without compromising quality. For instance, you might consider using more cost-effective materials, streamlining processes, or optimizing the size of your team to save resources while maintaining efficiency.

2. Prioritize requirements

Assess each requirement based on its importance and potential impact on the project's success. Ensure all requirements are essential and remove any that aren't crucial to the project. This way, you can concentrate on delivering the most critical requirements within the allocated budget.

3. Re-evaluate the timeline

Explore whether delivering the project in phases rather than all at once is feasible. Adopting a phased approach can help spread costs over time, reducing immediate expenses while still working towards the project's ultimate goals.

4. Communicate with stakeholders

Maintain open and honest communication about budget constraints. By discussing the situation early on and presenting options for delivering the project within the given budget, you'll allow stakeholders to adjust their expectations, consider compromises, or even provide additional funding if they understand your constraints.

5. Consider alternative solutions

Look into other cost-effective options, such as outsourcing specific project tasks or using off-the-shelf software instead of developing custom solutions. These alternatives may help you reduce costs while still meeting project objectives. Additionally, discuss creating a minimum viable product (MVP) with your client as an initial step. An MVP can provide a starting point for your project and can be built upon as more resources become available.

What do you do when a project goes over budget?

Despite taking precautions, cost overruns can still occur , but as the budget owner, it's crucial to act quickly and efficiently to address the situation. 

Here are some tips to help you navigate a plan to get back on track:

  • Identify the root cause : What is the root cause of the budget overrun? Was it due to scope creep , unforeseen expenses, poor estimating, or other factors? Understanding the root cause first is needed to help explain and address the issue to the client.
  • Communicate with stakeholders : Communicate about the budget overage, the root cause, and the steps that will be taken to address the situation. This includes the project sponsor , project team , and other stakeholders impacted by the budget overage. Keeping it to yourself in hopes it will work itself out puts the trust in the relationship at risk.
  • Prioritize remaining work : Base this on its importance and potential impact on the project's success. Focus on delivering the most critical requirements within the remaining budget. Work with your stakeholders and team directly to build out this plan.
  • Adjust the budget : Adjust the budget to reflect the new situation. This may involve reducing the scope, increasing the budget, or finding other ways to address the budget overage.

With Float, you have a 360-degree view of your project and company resources , making it easier to identify areas where you can streamline tasks and assignments.

For example, suppose you need to add more resources to a particular project. In that case, Float provides you with a full view of the range of talent within your organization, their skills, and their available time. This feature is handy when you need to quickly identify who is available to assist with a particular task or project phase.

Float also allows you to view your entire project at a high level or focus on a particular phase to determine what tasks can be adjusted or reassigned to solve any unexpected issues that arise. This can be invaluable when navigating unforeseen problems that threaten to derail a project's budget.

By utilizing Float, project managers can keep a close eye on the budget and actual cost and adjust as needed to ensure that the project stays within budgetary constraints. 

Supercharge your planning with Float

Create your project and resource plan with confidence, and keep track of timelines, capacity, and budget.

Real-life example: What's managing a project budget really like?

Project budget management is challenging, especially when unexpected issues and expenses arise. As a digital project manager, I've faced several situations where keeping the project within budget seemed like an uphill battle.

One project that comes to mind is developing a new app for a significant client. The client had ambitious goals, and the development team had to work quickly to deliver on those goals. Despite spending several weeks planning and developing a detailed project plan and budget, I was still concerned that unexpected expenses would arise.

Unfortunately, my fears were realized when the development team encountered several unexpected roadblocks that threatened to derail the project and blow the budget. Technical difficulties required additional work hours to resolve, and miscommunications with the client caused delays and confusion.

As the project manager, I knew I had to act quickly. I worked closely with the development team to identify areas where we could reduce costs without compromising the quality of the work. We looked for ways to streamline workflows, automate processes, and eliminate unnecessary steps to reduce the time and resources required. 

Despite our best efforts, however, the project still went over budget. I knew I had to have a challenging conversation with the client, so I prepared a detailed report outlining the additional funding required, the underlying reasons, and the steps we had taken to keep costs under control. To my surprise, the client understood and appreciated my report's transparency and honesty. We worked together to identify ways to reduce costs in future project phases.

Meeting the challenge of managing project budgets 

Managing a project budget can be daunting, but it's not impossible. 

By understanding the root causes of potential overages and involving your team and clients in the planning process, you can proactively avoid unexpected issues and stay within budget constraints. Regular communication with your team and clients about the state of the budget is crucial for building trust and avoiding surprises down the line. Transparency along the way can also foster a more collaborative environment, where all parties work together to find solutions to any budget overages that may occur.

Remember to identify each potential project risk upfront and prioritize requirements based on their impact on the project's success. Utilize project planning tools like Float to get a full view of project phases, resources, and tasks and adjust the budget as needed.

Ultimately, managing a project budget requires a combination of skill, attention to detail, and a willingness to be flexible. With the right mindset and approach, you can successfully navigate the budgeting process and deliver a project that meets the expectations of everyone involved.

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budget project management

Budgeting In Project Management 101: The What, Why & How

Ever heard of the saying “follow the money”? Project management budgeting is the key to successful projects and happy clients. 

The definition of budgeting in project management is basically estimating how much a project will cost and then tracking billable expenses as you go. This requires a working knowledge of how long tasks take, what resources you need, and how much similar projects have cost in the past. 

Keep reading for the what, why and how of budgeting your next project successfully!

Overview on Project Management Budgeting

Let’s start by answering “ What is project budget management ”? 

Project management budgeting is when you figure out how much money you need to complete a project. This is either for your own business, or for your client projects. 

The project manager is responsible for giving managers or clients an estimate for how much a project will cost. From there, you can figure out whether you need more time, materials or resources to complete the project to a high standard. 

Project management budgeting uses tools and systems like:

  • Time trackers to track budgets, targets and hourly retainers  
  • Reporting software to give feedback to client and team members as you go 
  • Risk analysis and expense scenarios based on other similar projects 
  • Working with the accounting team
  • Getting clients to give their budget and matching it to your services 
  • Assigning the right team members according to their strengths and hourly rate

Importance of Budgeting in Project Management

The first thing clients will ask when they want you to manage a project ? 

“How much will it cost?” 

All business endeavors require a significant amount of logistical planning. However, the project budget is the life blood. Without a clear idea of how much your clients can and will spend, projects will be less of a growth investment and more of a sinkhole. 

Project budget tracking allows you to 

  • Give your clients an accurate estimate of costs 
  • Create invoices without any surprises or hidden costs for the client 
  • Figure out how many hours your client can afford 
  • Bring in third party contractors to help complete the work
  • Pay for any software or materials you need to get the project done 

6 Methods of Budgeting in Projecting Management

There are several approaches you can take to estimate a project budget. The method you choose will depend on factors like whether you’ve completed similar projects, your billable versus non-billable hours , and how much information you have about the scope of the project. 

Analogous Estimating

Analogous budgeting gives a budget estimation based on similar projects you have completed in the past. This is best for when someone needs a quick price gauge. An analogous estimate will give clients or team members a basic idea of costs, but will probably need to be updated along the way. If this is a unique project, you will probably need a different method for budgeting. 

Parametric Estimating

Like analogous budgeting, parametric budgeting helps estimate a budget based on similar projects. The difference is that the parametric method is a quantitative approach that takes various factors, prices and historical data from other projects and applies it to the current one. For example, a company might want to estimate the cost of installing new software. This would require parameters such as 

  • How many interfaces the company needs
  • The fixed price of installation 
  • Hours historically needed for testing and revising 
  • Average number of days it usually takes for a software company to install their product 

Parametric estimating gives a slightly more accurate budget based on historical data. 

Top-down Method

The top-down method of project budgeting is when you start with a total project budget. From there, you see how much you can allocate to each part given the scope of the project. This would be an appropriate method if the client has a set budget or you are working with a grant for example. 

Bottom-up Method

The bottom-up method is essentially the opposite of the top-down method. Instead of starting with the total allocated budget, you have a list of all the resources you need, the approximate price of each one, and then calculate the total budget based on what is needed. From there, you can re-analyze the scope of the project, or add more if there is money leftover. 

Three-point Estimate

This project budgeting method provides a well-rounded analysis. It takes the most expensive, the least expensive and the most likely budget scenarios. This requires a certain amount of data and risk analysis and gives clients a better idea of what to expect as the project progresses. For example, in the most expensive scenario you might include factors such as clients requesting multiple calls which count as billable time. 

Earned Value Analysis

Earned value analysis is almost like an amalgamation of the other budgeting methods. Once the project manager gives an estimate and the client signs off on it, an earned value analysis keeps track of the budget at each stage. This helps keep costs as close to the estimate as possible by tracking hours, targets, and any unexpected expenses. 

Tips for Accurate Project Management Budgeting

Successful project management budgeting requires planning, adaptation and open communication. Nobody wants to be blindsided by hidden costs! To ensure positive client relationships in your next project, try these tips when negotiating the budget. 

Keep Open Communication With the Stakeholders

Clients pay good money to get a job done. They deserve to know how their budget is being spent! Projects can change over time, and therefore the original budget estimate may change over time. Keeping open communication both ways is the simplest way to keep everyone happy. If you are using a time tracking app like MinuteDock, you can even create a private client dashboard where they can check in on their project without taking up non-billable hours. 

Adapt to Changing Situations

To get the work done to the best of your team’s ability, you might need to adapt as you go! Maybe someone thinks of a faster way to do something, or one stage of the project is taking longer than expected so you need to cut costs somewhere else. 

Focus on The Organization's Needs

Whether the project budget is for you or for your clients, make sure you stick with the overall goals. Everybody wants to win, and keeping their needs at the front of your budget planning project management will build trust and rapport while you finish the project. 

Track Budgets in Real Time

Time tracking is your secret weapon for staying on budget for each project. Using an app like MinuteDock lets you 

  • Set targets and budgets on a daily, weekly or monthly recurring basis - perfect for retainer agreements or agreed workloads
  • Set up hourly targets for work so you can keep on track as your team works. You can also set budgets and dates to get your projects completed on time
  • Watch budget progress updates instantly as you and your team track time, letting you & your team see their status at a glance.

Final Thoughts

Budgeting is crucial for project management. It ensures that you are completing projects efficiently and keeping clients happy- all the things a growing business should aim for! 

Want to make project budgeting even easier? MinuteDock is designed for teams to help them track time, stick to budgets, and deliver exceptional projects for their clients on time, every time.

Want to learn more about MinuteDock?

We've built the best easy to use time tracking software for individuals and teams.

Other articles that might spark your interest...

Free Project Budget Templates: Simple to Advanced

By Andy Marker | February 25, 2022

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We’ve compiled the most useful free project budget templates for project managers, professional services teams, accountants, and other project budget stakeholders. 

Included on this page, you’ll find a simple project budget template , a construction project budget template , a sample project proposal budget template , and a multiple project budget Gantt chart template , as well as a list of helpful tips for completing a project budget template.

Simple Project Budget Template

Simple Budget Plan Template

Download Simple Project Budget Template Microsoft Excel | Microsoft Word | Google Sheets  

Use this simple project budget template to plan and track all required tasks, resources, and the associated costs. Simply enter project tasks, subtasks, status, start and end dates, as well as labor and materials costs. You can enter fixed costs and compare budgeted and actual amounts. 

The Balance column reflects each task’s under/over amount, and the built-in subtotal line tallies all task balances to give you the big picture of your project’s financial outlook. Use this customizable template to define and track any expenses your project incurs, and to ensure that you successfully complete your project within budget. 

Find additional project proposal templates and learn more about getting the most out of your project-budget proposals.

Project Management Budget Template

Project Management Budget Template

Download Project Management Budget Template Microsoft Word | Adobe PDF | Google Docs  

Use this template to stay on top of your project budget and ensure that you, your team, and all other project stakeholders have easy access to the project’s financial details. This advanced project budgeting template offers space for you to define your project’s purpose, reporting requirements, spending limit authorization levels, cost variance action plan, cost estimation process, cost baseline, work breakdown structure (WBS), cost control and metrics, change control process, and total project budget. This detailed template helps you monitor your estimated and actual budget amounts in order to successfully launch and manage the project.

Construction Project Budget Template

Construction Project Budget Template

Download Construction Project Budget Template  Microsoft Excel | Google Sheets

Use this construction project budget template to break down construction task costs by general requirements, site prep, on-site water or sewer, utilities, excavation and earthwork, foundation, rough framing, electrical, and all the other construction stages. Enter labor costs for each task or subtask hours and rate) and materials (quantity and cost) to determine your project’s budgeted and actual amount, and by how much you’re over or under budget. Customize this template to reflect your unique construction project tasks and needs. 

Read our guide on construction budgeting to find more construction-budgeting resources, and to ensure that you hit your budget goals.

Project Proposal Budget Template

Project Budget Proposal Template

Download Project Proposal Budget Template Microsoft Excel | Google Sheets

Use this comprehensive project proposal budget to account for the costs of every task in your proposed budget. For each task, enter a unique WBS, a description, status, planned and actual start dates, targeted end date, labor and materials costs, and budgeted amount. Then, enter the actual amount spent to complete each task, and view the under/over amount and make any necessary adjustments. Use this tool to anticipate the differences between your proposed and actual budget, and to adapt accordingly.

Project Budget Control Template

Project Budget Control Template

Download Project Budget Control Template — Microsoft Excel

Keep an accurate budgeting record and tight control of project-related spending with this unique project budget control template. Enter line-by-line tasks and subtask costs, and the template will automatically calculate subtotals to reflect whether your individual components — as well as the project as a whole — are over or under budget. You can use this simple project budget control template to control costs for a single project, related projects, original project budget figure comparison, or multiple projects.

Project Budget Definition Spreadsheet

Project Budget Definition Spreadsheet

Download Project Budget Definition Spreadsheet Microsoft Excel | Google Sheets  

In order to create a successful project-specific budget, you need a customizable blueprint to account for all of the components. Use this project budget definition template to list a project’s profit and loss (P&L) components, including revenue, cost of goods sold (COGS), labor costs, and more. Under Balance Sheet Category , list cash (budgeted, actual, and variance), inventory, net fixed assets, long-term debt, and other financial factors. The template provides you with a month-by-month, quarter-by-quarter, and annual insight into your project’s planned or implemented budget.

Sample Project Proposal Budget Template

Sample Project Proposal Budget Template

Download Sample Project Proposal Budget Template Microsoft Excel | Google Sheets

Take the guesswork out of creating a project proposal budget with this sample template. The template includes sample text that guides you through the project budget creation process, along with sample labor, materials, and fixed costs; it also prompts you to assign individual task statuses, labor costs, proposed start and end dates. Use the pre-filled, editable task and subtask line-item amounts to determine whether you’re over or under your proposed budget, and how you might adjust to ensure that your proposed project comes in under budget.

Project Expense Tracking Template

Project Expense Tracking Template

Download Project Expense Tracking Template Microsoft Excel | Google Sheets | Smartsheet

Use this project expense tracking template to ensure that you proactively account for all of your project expenses, so that any shortfalls don’t risk your project’s success. This template includes customizable budget-component categories, auto-tallying materials and labor sections, space to note budgeted versus actual amount for each budget component, and the over/under amount. Propose and track the expenses for each individual task, and keep an eye on how each of these variables affect your project’s bottom line. 

Read our project cost templates article to find additional templates and learn more about getting the most out of your project budgeting.

Multiple Project Budget Gantt Chart Template

Multiple Project Budget Tracking Template

Download Multiple Project Budget Tracking Template — Excel

Manage multiple projects at once with this Gantt chart template, which provides a project budget that’s unique for each individual. Guide team members and project sponsors through your financial details with this dynamic template, which includes example text and a visually rich Gantt chart that lists your projects’ over/under figures. Compare project-by-project budgets, or adjust figures for an individual project to ensure that you’ve adequately budgeted for your proposed project and are prepared for successful execution.

Project Budget Breakdown Template

Project Budget Breakdown Template

Download Project Budget Breakdown Template  Microsoft Excel | Adobe PDF | Google Sheets  

Keep tabs on your project’s proposed versus actual budget with this easy-to-use project budget breakdown template. This fully customizable template enables you to accurately estimate the cost of each project category, review category subtotals, and then compare the total budgeted amount with your allotted budget.

What Is a Project Budget Template?

A project budget template is a tool that project managers use to estimate, implement, and gauge projected versus actual project costs. Use a template to track the project budget at the tasks level and identify your budget projections. 

A project budget template takes the guesswork out of budgeting for projects, so that you have an accurate financial picture of all project-related costs and can identify how the costs of every project facet affect the big picture of your allotted budget. A project budget template can also alert you when tasks run over budget, so that you can adjust costs or other expenditures to stay within project budget. 

A project budget template provides insight into the accuracy of anticipated expenditures and revenue sources so that you can use the template to justify any project-related cost adjustments to successfully execute the project. 

A strong project proposal template will typically include the following sections to account for all of your proposed expenses: 

  • Actual: Enter the actual cost of each budgeted task.
  • Budget: Review the budgeted amount for each individual task.  
  • Category: Enter category names for each task series or each subtask for your project’s budget. 
  • Fixed Amounts: Enter the fixed costs for each task. 
  • Labor: Enter each budgeted task’s projected hours and hourly rate.
  • Materials: Enter task units, cost per unit, travel-related costs, and costs per piece of equipment or required office or work space. 
  • Project Title: Enter a title for the project and the projected and implemented tasks plan to track. 
  • Subtotal: Review the combined under/over amounts to determine your subtotal and assess whether your project is within budget.
  • Task: Enter each budgeted task, a WBS number, a description, status (e.g., not started, in progress, completed), anticipated and actual start dates, and a proposed end date. 
  • Under/Over: Review each task’s under/over amount to determine any discrepancies between budgeted and actual task amount, and make adjustments accordingly.

Streamline Budgeting with Smartsheet for Project Management

From simple task management and project planning to complex resource and portfolio management, Smartsheet helps you improve collaboration and increase work velocity -- empowering you to get more done. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed.

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time. Try Smartsheet for free, today.

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Project Budget Template for Excel

Get your Project Budget Template for Excel or open it in ProjectManager, the best way to manage your projects online.

budget project management

A project budget contains the financial details of your project, including the estimates of all the project costs and the money you need to layout to lead a successful project, from resources to materials.

Monitor project expenses with this Excel budget template. It even includes color-coding to let you know when you’re in the red! The budget is the life’s blood of your project, so you need to monitor it accurately to avoid cost overruns. That’s where this project budgeting template comes in handy.

Or, better yet, build your project budget in ProjectManager. Set a budget at the creation of a project, estimate planned costs and enter actual costs as the project unfolds. Even incorporate labor rates for your team, so you can monitor resource costs during execution. Use the Gantt chart, Sheet view and dashboards to compare actual costs versus planned costs to make sure you deliver on budget. Get started with ProjectManager in minutes and start dynamically tracking your budget.

Project budget template management in ProjectManager

Why You Need a Project Budget Template

A project is made up of tasks that lead to the completion of a project or service. That process isn’t free. There are resources necessary, such as hiring a project team, possibly contracting vendors, maybe parts and a whole slew of other expenses that need to be paid and accounted for.

That’s where budget management comes in, during the project planning phase. It’s imperative that you calculate what the costs of these things will be as close as possible to create a realistic cost baseline, get the allocated funds and not go over budget, which could jeopardize the entire project.

That means your cost estimates have to be accurate, or as much so as you can make them. This project budget spreadsheet can help you do that.

ProjectManager's free project budget template

There’s a lot of uncertainty in managing a project, which makes creating the budget plan difficult, but with a free Excel budget template you’re on solid ground to build a financial model that’s sound and able to do the job at hand.

Some of the project costs are easier to collect, such as:

  • Labor costs
  • Consultant fees
  • Raw materials
  • Software licences

Other project costs may change or carry from one project to the next, such as:

  • Telephone charges
  • Office space
  • Office equipment
  • General administration
  • Company insurance

When you have downloaded and created your project budget template, there are all the fields necessary for you to get started on this pivotal project planning process. But without an expense tracking tool to collect all this data, you are starting off with a disadvantage. The budgeting process may seem like fuzzy math, and it’s certainly no exact science, but with the proper project budgeting software you can have a better handle on defining the financial constraints of your project. By doing so, you have given the project a better chance to succeed.

Besides budget templates, two such project management tools that can help you manage budgets are Gantt charts and dashboards. ProjectManager offers an award-winning Gantt chart feature that lets you apply costs directly to tasks. You can also assign labor costs to team members, and that potential cost is automatically calculated as you assign them tasks and work hours. Plus, as the project unfolds, our real-time dashboards can track project costs and compare them against your initial planned costs, so projects don’t even have to go over budget.

ProjectManager's dashboard view

When To Use a Project Budget Template

Money makes the project happen, so it’s likely the costs will be discussed during project initiation. However, traditionally, budget management concerns begin to be addressed during the planning stage of a project.

You can’t figure out your budget without first knowing what it’s going to pay for. That’s why budgets are conceived as you start to plan and organize your project schedule. To make an accurate project schedule, you need to define the work that will be done and how long it will take. To do so, you can use a work breakdown structure (WBS) to identify all the project tasks. Those tasks depend on having the funds to pay for the resources needed to execute them.

Our free budget template is really a cost control mechanism to compare what it will cost to complete the project against what the project has been authorized to spend. Therefore, the budget spreadsheet template allows project managers to build their budget within the cost and time constraints of the project.

A project budget is defined by estimating costs for all the individual tasks that make up the project, including the resources needed to execute them. You’ll need those cost estimates to fill out your project budget Excel template. You can use our estimate template to make your estimates and share them with your stakeholders.

Who Should Use this Free Project Budget Template?

The buck stops with the project manager when it comes to overseeing every aspect of a project, which includes filling out and maintaining this free project budget template. They will work on the project budgeting activities, but not alone. In order to make more accurate cost estimates, project managers will seek guidance from those people on the project team who are involved in executing the project.

Once the project budget has been completed, the team will be released to focus on the tasks they’ve been assigned. The budget management will remain the purview of the project manager, but depending on the size of the organization, the day-to-day work might go to an administrator, such as a project coordinator or assistant project manager.

However, the project budget is also shared with stakeholders. They need to stay in the loop and often have change requests throughout the project that will directly impact the budget. Therefore, during stakeholder presentations, budgetary issues are usually part of the agenda, if only to determine if the project is not going over budget.

How to Use ProjectManager’s Project Budget Template for Excel

Your free Excel template is a blank slate and now you have to turn it into a useful tool. By filling in as much of the information requested in this project budgeting template as you can, you begin to get control over the financial aspect of your project. Let’s start.

Labor and Materials

This is the meat and potatoes of the project, and likely the most expensive aspect of the work you have to include in your project budget Excel template. To start with, you want to use a work breakdown structure to separate these into line items tagged to a specific task. This may seem like an unnecessary detail, but it’s not. Every dollar needs to be accounted for if you want to reign in costs, so the more exact you can be the better your expenses estimate will be and the closer your project will come in within budget.

project budget with labor & material costs recorded

Now that you’ve broken down your project into the small tasks that make it up using the work breakdown structure or WBS column, it’s time to assign a labor and material cost to each. This is the money you’re going to spend on assembling the team responsible for each task, the time they’ll take to complete it and the materials they’ll need for those tasks. It’s a lot of work, but by doing it before the project begins, you’ll save yourself headaches and over-expenditures.

Other Line Items

Of course, a project budget is not only labor and materials, even if that is the heavy lifting. It’s important to account for every dollar and cent, and those smaller items—and sometimes not-so-small items—are going to add up. Don’t let these costs break your budget: find them and then collect them on your free Excel project budget template.

Take travel, for example. Your project budgeting template needs a column in which you note when and if you have to travel, and then how much that will cost, including any stipend. Maybe travel doesn’t plan in your project, but you need to consider it. Better to have thought it through and dismissed it, than to have a cost come up in the midst of the project that you’ve not accounted for.

The same goes for equipment. You’re definitely going to have costs in this area. Equipment costs can vary from very expensive heavy equipment to minor ones, but you have to register those expenses in your project budget template in order to make an educated guess of what the project is going to cost.

Fixed Items

There are fixed items, too, and there’s a place for you to collect them on the free project budget template for Excel. A fixed budget item is one where the amount is set and doesn’t change, as in one that is the same amount every week or month. There’s also a column for miscellaneous costs, which are those that do not fit into any of the other categories on the downloaded project budget Excel template.

budget in project management with fixed costs

Planned v. Actual Budget

The last part of your free Excel project budget template is the columns that you’ll be most interested in following when tracking the project. It’s here that the spreadsheet calculates the planned budget against the actual one or the real money you’ve spent for that task. One column is your estimated budget expenditure and next to it is the money that really went to completing the work, followed by a third column in which your balance is noted. Here is where you can see if you’ve gone over- or under-budget.

planned and actual budget with balance column

How to Use a Project Budget Excel Template in ProjectManager

If you’re ready to move on from a static Excel budget template to a robust project management software, look no further than ProjectManager. It’s easy to transfer your data over from the Excel sheet into the software. All you need to do is start a new project and open up the Gantt chart project view.

creating a new project in ProjectManager

Once you’ve started your project, you can transfer the info from your filled-out Project Budget template into the Gantt chart manually. The same rules apply – just type in the task names, the assignees, the planned hours, the project costs and so on.

a screenshot of ProjectManager's gantt chart

Now that your project is filled out in ProjectManager, you can get to work tracking the costs as your project progresses. That’s because the budget is updated as team members complete tasks and update their status, giving you the most up-to-date information. Then you can look at the budget for the project or even many projects through the dashboard view . Think of it as an overview at-a-glance, but it’s also able to drill down deep into the detail you need when you need it.

What Other Project Management Templates Can Keep My Project on Budget?

The project budget template is a great tool to figure out how much your project will cost and make sure that number is within the approved funding for the project. However, there are other project management templates that can help you control costs and manage areas of the project that can impact your overall budget.

Timesheet Template

Use a timesheet template to keep track of your team’s time spent on their tasks, including cost per hour, vacation and overtime. Timesheets from past projects can help you estimate your project budget based on how much time was logged for tasks in the past. It also keeps an eye on your bottom line, showing how profitable your effort is and providing clues to add greater efficiencies.

Work Schedule Template

Another way to monitor your labor costs is with a work schedule template. This template lists your team and where they’re working, what time and what responsibilities they have over the week or month. This information is crucial to working more productively and managing costs. It helps you reduce resource costs, which makes your budget go further.

Risk Tracking Template

Risk is always on the horizon of a project, threatening to impact your budget. A risk tracking template collects those risks as you identify them and allows you to do a risk assessment to rank their priority and then track them as your team resolves the issue. Having a tool to manage risks as they arise in your project gives you the means to control them and the costs associated with those risks.

We have many other project management Excel templates that you can use to manage your projects.

Watch a Budget Tutorial Video

For more information on how to create and manage a project budget, watch the video below. Jennifer Bridges, PMP, gives you a number of crucial tips that can help you get the most out of your project budget template.

More Related Content

There’s more than a great software package available on the ProjectManager website. We regularly publish a blog with articles and videos on project management, leadership, and business concerns. Here are four that are relevant to project budgeting.

  • Project Budget Proposal Template
  • Project Documentation: 15 Essential Project Documents
  • 7 Steps for a Successful Project Budget
  • 6 Ways to Track Project Expenses
  • Keeping Projects Under Budget
  • 7 Tips for Preventing Cost Overrun on Projects

If you want to take your project to the next level, then you’ll want to work with project management software that has the tools to plan, monitor, and report on your project in real-time. Our free budgeting template helps with budget management and expense tracking, but our Gantt charts and dashboards are superior budgeting tools that automate the budget planning process and offer you many more project management features. See for yourself by taking advantage of our free 30-day trial offer.

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Budgeting in Project Management: Methods, and How to Estimate a Project Budget?

Budgeting is the foundation projects are built upon, budgets are the limiting factor because the amount of finance that is available for a project will then determine how that project is created, how many resources both human and capital are employed, and how that project is executed.

A project cannot begin before a detailed budget is created because the budget gives a sort of blueprint to the project leader to decide the course and direction of the project.

What is a Project Budget

A project budget is the sum of money that has been allocated or sanctioned for any particular project that spans over a specific period. As stated above, the budget is a limiting factor for any budget, a budget defines how much can be spent in order to achieve the desired target of the project.

The purpose of a project budget is therefore to keep the costs within the predefined limits of the budget in order to meet the expected goals.

The project manager needs to make sure that the budget is followed and maintained, it has been seen that project managers at times get distracted and focus more on completing the projects on time instead of focusing on meeting the deadline while remaining within the budgetary limits.

Importance of project budgeting

  • Budgeting is an essential part of getting a project approved and secure project funding.
  • Well-planned budgets become the foundation for project cost control.
  • Project budgets have direct relation with the financial viability of an organization.

Project budget management is therefore a key skill that project managers need to be equipped with. It consists of steps that are designed to help the project manager manage the project effectively because if a project has got a well-defined budget as stated above then the scope, objectives, and goals of the project will also be well defined and clear for the project manager.

Some of the steps in creating a simple project budget are as follows.

  • Budget estimate: This step requires creating a budget using the income and expenditure data available from all the cost centers or departments. Costs that are not available will have to be estimated using forecasting techniques discussed below. 
  • Milestones, tasks, phase: To make the project budget as simple as possible it is important to break it down into separate tasks, milestones, or phases as applicable. Breaking down the project into manageable milestones helps prioritize and focus on the most important task, thereby increasing the chances of remaining within the budgeted limits. 
  • Add the estimates: Once the cost estimation is done and the project divided into tasks or phases, all of the estimates relating to different tasks and phases should be summed up to arrive at the final figure for the budget.
  • Add contingency expenditure: At the time of estimating the budget, the complete scope of the project isn’t usually clear, and therefore it is better to allocate some amount for contingency expenditure. It is a norm to keep this figure at least 10% of the total budget.

How to estimate a project budget?

A number of forecasting techniques can be used to estimate a budget. Some of the techniques have been briefly discussed below.

Bottom-up estimation

The bottom-up estimation is the most commonly used method for creating project budgets. It simply requires summing up all of the costs allocated to the different activities in the project.

The sum of all the costs is the total project cost. Bottom-up estimation is particularly useful when every minute aspect of the project is known.

Since this technique accounts for every bit and aspect of the project, it takes a considerable amount of time to draw up a budget using the bottom-up estimation.

It is important to understand that budgeting is a continuous process, budgets grow and need to be updated as the project continues, and usually, as the project moves into its later stages and becomes more defined and the goals become clearer, the budget too becomes much more detailed.

Therefore there is a need to continually adjust the budget as the scope becomes clearer.

Top-down estimation

As the name suggests, this approach is the exact opposite of the first technique. The top-down estimation approach takes the sum total or the final budgeted figure and then breaks it up and allocates it to all the different activities, tasks, and phases of the project.

Top down approach is useful at the consideration stage where there is a need to decide whether the project should be accepted or not, while keeping the budget as a limiting factor.

The drawback of this approach is that it leaves very little room for any change, the budget is very much set in stone with this approach, every project experiences an increase in scope and planned tasks as it proceeds and the top-down approach discourages frequent changes to the plan and revisions in the budget.

It is therefore ideal for projects of recurring nature where the nature and scope of the project are fully understood. 

Analogous estimation

This approach is suitable for experienced project managers who have a good idea of what the nature and scope of a project is and can therefore quickly draw up a budget based on similar past experiences.

An experienced project manager can use past data and experience to estimate the cost of a similar project, for instance, if a project manager has worked on a project to construct a mile-long bridge, then estimating a budget for a two-mile-long bridge under similar conditions won’t be too difficult. 

The drawback of this technique is that it is only useful for projects for which a precedent exists, new and unique projects cannot effectively use this approach, similarly inexperienced project managers may find it difficult to apply this technique.

Furthermore, analogous estimation is not a very accurate technique because it relies on drawing parallels between similar projects and there are many aspects of costs that change over a period due to inflation, wage rise, etc.

Parametric estimation

This can be considered as an improvement upon the analogous approach. The parametric approach focuses on gathering data points from similar projects and then applying them on the project at hand.

For instance, a project manager can use the material cost and labor cost from an ongoing project, training cost estimates from a past project, and capital expenditure estimates from yet another project with similar outlay and activities.

The objective of parametric estimation is to make the analogous estimation technique more accurate with the inclusion of data sets that suit the current project from many different projects, in order to increase the overall relevance of costs.

It uses statistics, historical records and variables to create a budget quickly compared to a bottom up approach but similar in accuracy.

The drawback is that finding similar and relevant data sets may be difficult and time-consuming in and of itself and this technique too only applies to projects for which similar projects already exist. 

Three-point estimation

The three-point approach is a scenario-based approach that includes the best, worst, and most likely scenarios and takes their weighted average. This approach minimizes the risk of exceeding the budget and therefore allows project managers to deliver the project within the budgeted estimates. Perhaps the only drawback of this approach is that it is a time-consuming approach.

Budgeting in project management, therefore, can be considered as a key activity that gives the project its direction, a good project budget can not only help complete the project efficiently but it can also make things much easier for the project manager, thereby allowing them to focus on other core activities of the project.

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What is a budgeted income statement meaning, example, and importance, budgeting: definition, examples, importance, contents, and preparation processes, difference between budgeting and forecasting – 4 main different, what is project budget definition, example, and importances.

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  • Project cost management: Definition, st ...

Project cost management: Definition, steps, and benefits

Julia Martins contributor headshot

Cost management is the process of planning, budgeting, and reporting project spend in order to keep teams on budget and overall costs reasonable. In this article, we'll go over the four functions of cost management and explain exactly how to use them to improve your project's bottom line.

What is cost management?

Cost management is the process of estimating, budgeting, and controlling project costs. The cost management process begins during the planning phase and continues throughout the duration of the project as managers continuously review, monitor, and adjust expenditures to ensure the project doesn't go over the approved budget.

Why is cost management important?

Have you ever wondered what happens when a project goes significantly over budget? The consequences can be severe—from strained relationships with clients to financial losses. Let's consider an example:

A small software development team was tasked with creating a custom application for a client. Midway through, they realized the project was quickly exceeding the initial budget. They faced a common dilemma: continue as planned and absorb the extra costs or re-evaluate their approach.

By implementing rigorous cost management strategies, the team was able to identify areas where expenses were ballooning. They streamlined their project management processes, prioritized essential features, and renegotiated terms with subcontractors. This approach not only brought the project back within budget but also improved their working relationship with the client, who appreciated their transparency and commitment to delivering value.

This scenario highlights how effective cost management can transform a potentially disastrous situation into a success story.

How to create a cost management plan

Cost management is a continuous, fluid process. However, there are four main elements or functions that can be found in any cost management plan:

Resource planning

Cost estimating, cost budgeting, cost control.

Because new expenses can appear and project scope can be adjusted, cost managers need to be prepared to perform all four functions at any time throughout the project life cycle. Your workflow will vary according to the project’s needs.

Here, we'll break down each of the four elements in greater detail and explain what is required from the cost manager at each stage.

[Inline Illustration] cost management (infographic)

The very first step in any cost management process is resource planning, which is when the cost manager reviews the project's scope and specs to figure out what resources the project will require.

A resource is anything that helps you complete a project—including tools, money, time, equipment, and even team members. To create the most accurate resource plan possible, consult directly with team leads and stakeholders about what resources they will need during the project. People with hands-on experience in each project department will have a better understanding of what resources will be required. 

For this step, you'll need:

Clearly defined project objectives

A high-level project roadmap or a work breakdown structure (WBS) , depending on the complexity of the project

A tentative resource management plan

A project scope statement

Once you have a list of necessary resources, the next step is to estimate what it will cost to procure them. The key to this step is to gather as much pricing information as possible so that you can make informed cost estimates.

For tangible resources like tools, supplies, and equipment, get real price quotes from sellers to inform your cost estimate. For labor costs, get multiple price quotes from potential contractors to help give you a realistic idea of what the work you require will actually cost. Keep in mind that some time may pass between when you make your estimate and when these items will be purchased, so you should build in some room in case prices rise. 

In addition to building in a cushion for each individual cost, you'll also need to add a buffer of 5–10% to your cost total to account for unexpected expenses. If this is your first time working with this project team, find out if the previous cost manager generated budget reports at the end of past projects. 

You can take a look at how much previous projects' final costs deviated from their initial estimates and use this cost data as a benchmark to estimate how much of a margin you need to build into your estimation report.

In the estimation stage , you'll need:

Project schedule or a PERT chart , depending on the complexity of the project

A list of your project deliverables

Clearly defined success metrics

Now that you have general estimates for your project needs and resource requirements, you can begin to work on your project budget . Your project budget is a detailed plan of how much you plan to spend during the project, for what, and by when. 

Depending on the complexity of your project, the “when” may significantly influence your cost management strategy. For multi-year projects, you may want to specify cost allocations so that no more than 30% of your budget should be spent in the first year, etc. This can prevent cost overruns later down the road.

In this stage, you'll need:

A project budget document 

A project stakeholder analysis

The bulk of the cost management process is made up of cost control . This is the process of recording and accounting costs as the project progresses, making adjustments, and alerting stakeholders to problems when they occur. The goal of the cost control step is to compare actual project costs with original budgets and estimates and take steps to make sure the project stays as close to plan as possible.

The frequency with which you review this will depend on your project. Sometimes you’ll want to review costs in real time. In other cases, you may check in monthly or even quarterly. Share cost updates as necessary through project status reports so the entire project team is on the same page.

Keep in mind that any changes to the project scope will impact the project budget and costs, so keep a close eye on scope creep. If the project cost deviates too much from what you budgeted, let your stakeholders know so you can proactively come up with an action plan.

Project management tool

Universal reporting tool

[inline illustration] cost management (infographic)

Post-project cost accounting

Once the project is over, it’s time to calculate cost variance and evaluate how far your project deviated from your original budget and estimates. What were the project’s total costs? How did your actual costs compare to your estimated costs? 

A successful project ends close to (but under) the forecasted project budget. If you spent too much money, you either underestimated your project budget or had too many unforeseen expenses. If this happens, hold a project post-mortem meeting to evaluate why that happened and prevent it from happening in the future.

On the flip side, spending too little of your budget is also not ideal. You estimated these costs for a reason, and if you came in significantly under budget, your cost-budgeting process was inaccurate. Log this information as historical data and keep it in mind for future projects, so you can increase your accuracy during the cost estimation phase.

How to calculate project costs

To ensure that your project stays profitable and within budget, it is essential to have a solid understanding of how to calculate project costs. 

Project managers have a variety of cost management methods to choose from, and picking the best one depends on the specific needs and scope of your project. Consider factors like project complexity, the predictability of tasks, client expectations, and the level of flexibility you'll need to achieve your cost-performance goals.

Calculating project costs on an hourly basis involves paying for the amount of work done, measured in hours. This method is particularly effective for projects where the scope is flexible or uncertain because it allows for adaptability as the project progresses. 

For example, consider a software development project. The development team's cost is calculated based on the number of hours they spend on the project. If the team works 100 hours a month at a rate of $100 per hour, the project costing for that month would be $10,000. This method provides flexibility and can accommodate changes in the project's scope effectively.

A flat rate, or fixed price, approach involves agreeing on a total project cost upfront. This method is ideal for projects with a well-defined scope and deliverables. This gives both parties a clear understanding of the total cost.

Imagine a marketing campaign. The agency and the client agree on a fixed price of $20,000 for the entire campaign. This price covers all aspects of the project, from planning to execution. The advantage here is predictability in budgeting, as the client knows exactly how much the project will cost, irrespective of the time and resources utilized.

The cost-plus method involves charging the actual costs of the project plus a markup or additional fee. This approach is often used in long-term projects where the costs cannot be accurately estimated at the start. It ensures that all project costs are covered and includes a profit margin.

For instance, in a construction project, the contractor charges for the actual costs incurred (like materials and labor) plus a fixed percentage as profit. If the material and labor costs amount to $50,000 and the agreed markup is 20%, the total charge to the client would be $60,000. This cost management method aligns the interests of the client and the contractor, as both parties aim for optimal cost performance.

Value-based pricing

Value-based pricing focuses on the value or benefit the client receives rather than the cost of the project itself. This estimation method is ideal for projects where the outcome has a high perceived value, regardless of the actual cost of delivery.

Consider a scenario where a consulting firm is helping a client increase their annual revenue. If the consultant's strategies result in a $1 million revenue increase, the consultant may charge a fee based on a percentage of the revenue increase, say 10%, which would be $100,000. Value-based pricing ensures that the pricing reflects the value delivered.

Effective project cost management methods

One of the most persistent challenges faced by teams across various industries is controlling and preventing budget overruns. These overruns not only strain financial resources but can also lead to compromised project quality, delayed timelines, and even project failure. 

Effective cost management is the key to tackling this challenge because it makes certain that projects are delivered within their allocated budgets while maintaining high standards of quality and efficiency.

Choosing the best cost-management method is key to addressing these financial challenges head-on. For further cost optimization, teams can leverage automation, management software, and dashboards that offer real-time cost analysis, cash flow, and future cost visualization. This will ultimately contribute to the success of your project.

Top-down estimating

Top-down estimating is a method where the overall project cost is estimated first, and then individual costs are deduced from this total. This approach is beneficial in the early stages of project planning, when detailed information is not yet available. It gives a quick and rough idea of how much the project will cost.

For example, in a new software development project, the project manager might estimate the total project cost at $200,000 based on previous similar projects. This total cost is then broken down into smaller segments like design, coding, testing, and deployment, each allocated a portion of the total budget. This method is effective for providing a preliminary cost framework and guiding early project decision-making.

Bottom-up estimating

Bottom-up estimating is the reverse of the top-down approach. It involves estimating individual tasks or components of the project first and then adding them up to get the total project cost. This estimation method is more accurate and reliable, especially for projects with a well-defined scope, as it considers detailed cost information.

Consider a construction project where each part of the project, such as foundation laying, framing, plumbing, and electrical work, is estimated individually based on detailed analysis. After estimating all these components, the costs are summed up to determine the overall project budget. Bottom-up estimating is ideal for teams that need precise control over each aspect of the project's costs.

Earned value management

Earned value management (EVM) is a sophisticated approach to cost management that combines measurements of project performance in terms of scope, schedule, and cost. EVM provides a comprehensive view of the project's progress and its alignment with the original project planning.

For instance, in a large infrastructure project, EVM would be used to track the following: 

Budgeted cost of work scheduled (BCWS)

Actual cost of work performed (ACWP)

Budgeted cost of work performed (BCWP) 

By comparing these figures, project managers can gauge the project's cost performance and take corrective action if necessary.

Three-point estimating

Three-point estimating is used to determine a more realistic estimate by considering three scenarios: 

Most optimistic (best-case) 

Most pessimistic (worst-case) 

Most likely 

This cost management method provides a range of possible outcomes, which can increase the predictability and cost performance of a project.

Take, for example, a new product development project. The project manager might estimate that the design phase could take 30 days (optimistic), 45 days (most likely), or 60 days (pessimistic). Using these three points, they calculate an average or weighted average duration, which helps in setting realistic timelines and budgets.

FAQ about cost management

What is the first step in project cost management.

The first step in project cost management is to define the baseline for your project's budget. This involves identifying all potential costs and inputs related to the project, including labor, materials, equipment, and any other expenses. Creating a baseline is essential because it provides the framework for monitoring and controlling expenses during the lifecycle of a project.

What are the 5 functions of cost management?

The five key functions of cost management are:

Cost estimation: Determining the total cost required for completing the project.

Cost budgeting: Allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

Cost control: Monitoring project expenses and implementing measures to keep costs within the approved budget.

Cash flow management : Ensuring there is adequate cash flow to meet project needs, which is critical for maintaining project momentum.

Procurement management: Managing the procurement of goods and services, ensuring that everything is obtained at the best possible cost and meets project needs.

What is cost management in project management?

Cost management in project management is the process of planning, estimating, budgeting, and controlling costs with the aim of completing the project within the approved budget. It involves a continuous process of measuring and monitoring project activities and expenses and implementing necessary adjustments to ensure that the project's financial resources are used effectively. 

Improve your project performance with cost management

Cost management has a lot of moving parts. But as long as your team has visibility into project costs, you can prevent cost overruns and ensure you’re finishing your project under budget every time.

To keep track of all of your project’s information, use a work management platform like Asana. From project costing and kickoff to post-mortem, Asana helps you stay in sync with your project team members and stakeholders during the entire project process.

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What is a project manager? Responsibilities and best practices explained

Browse topics.

A project manager, or PM, coordinates the elements of a project, aiming for timely completion within budget and with high standards. They're the central figure connecting project goals with the collective efforts of their team and help navigate obstacles to guide projects to their goals. 

This guide explores the role of PMs, highlighting their critical responsibilities, key skills, and best strategies. It also examines how platforms like Confluence can help PMs enhance team collaboration and communication across the project life cycle .

What is a project manager?

A PM is a leader who guides projects from the drawing board to the finish line. They make sure everything runs smoothly and stays on schedule. They gather necessary resources, unite team members, and work on continuous improvement .

PMs connect the day-to-day work with the bigger picture. They support the broader objectives of the company and satisfy stakeholder needs.

Project manager responsibilities

PMs juggle a variety of core responsibilities to lead a project through hurdles and changes. Mastery in each of these areas contributes to a smoother experience from the perspective of both team members and stakeholders: 

  • Project planning : PMs initiate the planning process, clearly defining the project's scope, goals, and objectives. They develop detailed plans outlining tasks, resources, timelines, and deliverables, creating a solid foundation for project execution.
  • Team coordination : Project managers assemble and direct project teams, assigning tasks based on members' skills and experience. PMs focus and unify team efforts by promoting collaboration, resolving conflicts, and leading effective team meetings . 
  • Risk management : PMs identify potential risks early, analyze their possible impact, and develop mitigation strategies. This proactive approach minimizes disruptions to the project’s schedule, quality, and budget.
  • Budget oversight : PMs estimate costs, establish budgets, track spending, and adjust as necessary to keep the project within financial boundaries while achieving fiscal efficiency.
  • Client communication : They maintain open and transparent communication with clients and stakeholders. PMs provide updates, respond to inquiries, and use feedback to adapt project scope to meet or exceed client expectations.
  • Maintaining quality standards : PMs implement quality control processes to ensure deliverables meet agreed-upon standards and satisfy client requirements. This helps maintain project integrity.

Project manager skills

The success of any project depends heavily on the unique blend of soft and hard skills possessed by the PM. Here are some of the critical soft skills that PMs need to excel in their role:

  • Communication : PMs must master verbal and written communication to convey project objectives, updates, and feedback to all stakeholders. This fosters alignment and collaboration throughout the project life cycle.
  • Adaptability : PMs need to respond to project shifts and unforeseen challenges with flexibility. They must be able to adjust strategies and plans to keep projects moving forward.
  • Problem-solving : PMs must approach issues decisively. They use critical thinking to analyze problems, devise solutions, and apply them effectively. This minimizes the impact on project progress and outcomes.
  • Leadership : PMs provide team leadership to inspire and motivate. They guide team members, support their development, and cultivate a collaborative environment.
  • Organizational skills : Exceptional organizational abilities allow PMs to balance multiple tasks and priorities. They skillfully map out schedules, allocate resources, and monitor project timelines to guide their team toward success.

Best practices for project managers

Great PMs commit to applying best practices consistently across projects. They understand that good project management comes from a blend of skill, strategy, and continuous refinement. Here are some key best practices:

Prioritize clear communication

Clear communication keeps everyone moving in the same direction and places transparency and efficiency at the heart of the team's workflow . Encouraging open exchanges of ideas, progress updates, and concerns helps the team tackle obstacles head-on and propels the project forward. 

Create effective project plans

Well-structured project plans contain the following key elements:

  • Scope : Define the project scope clearly. This helps prevent scope creep and ensures everyone understands the project boundaries.
  • Goals and objectives : Establish what the project aims to achieve. Objectives should be specific, measurable, achievable, relevant, and time-bound.
  • Milestones and timeline : Identify crucial milestones and create a timeline that outlines when each project phase should be completed.
  • Resources : Detail necessary resources (people, budget, technology) and allocate them effectively. This includes identifying roles and responsibilities.
  • Risk management : Anticipate potential risks and strategize how to address them. This fosters a proactive approach to uncertainty management.
  • Communication plan: Outline how you will handle communication within the project team and with stakeholders. This includes frequency, methods, and key points.

Use project management tools

Using specialized project management software empowers PMs to excel in their roles. 

Project manager software is a centralized hub for everything project-related, including plans, tasks, and resources. This simplifies outlining projects, distributing tasks, and tracking deadlines. Everyone stays in the loop, reducing mix-ups and enhancing teamwork .

Project management software also improves how teams communicate. Tools facilitate smoother updates, collaborative problem-solving, and efficient coordination. This includes commenting, file sharing, and simultaneous editing.

Confluence is the premier project management solution for PMs seeking to overcome the common PgM challenge of fragmented communication and scattered data and documents. The platform serves as a central repository for all project-related documents and knowledge. Information is readily accessible to anyone who needs it, allowing PMs more time to focus on strategic tasks.

Empower your team

An inspired and empowered team not only boosts productivity but also becomes a driving force behind project success. Effective PMs cultivate a positive work environment through various team management strategies , such as:

  • Ensure each team member knows their role, expectations, and how their work contributes to the project's success.
  • Give team members the freedom to make decisions about their work. This builds trust and encourages innovation.
  • Provide opportunities for team members to develop their skills and grow professionally. This can include training, workshops, or taking on new challenges within the project.
  • Regularly acknowledge and celebrate achievements, both individually and as a team. 
  • Create an environment where team members feel comfortable sharing their ideas, concerns, and feedback.

Effective project management with Confluence

Confluence transforms project management through centralized collaboration and efficiency. It serves as a dynamic platform where teams unite. They can share and update project plans in real-time, keeping everyone aligned and informed. Confluence offers many features for effective project management, including:

  • Simultaneous editing : Say goodbye to endless email chains. Edit documents together.
  • Ready-made templates : Jumpstart your projects with templates for everything from meeting notes to project plans .
  • Task management : Assign and track tasks right in your documents, keeping everyone accountable.
  • Effortless organization : With powerful search and sorting capabilities, finding what you need is a breeze.
  • Seamless integration : Jira works with other third-party apps, putting all your tools in one place.

Confluence is more than a tool—it's a game-changer for teams dedicated to improving how they manage projects and collaborate. It also supports versatile content types – think pages for detailed documentation, whiteboards for brainstorming, Loom videos for walkthroughs, and databases for structured information. AI capabilities further expand Confluence’s feature set by summarizing text, highlighting action items, and even adjusting the tone of specific communication.

Try Confluence today and experience a unified workspace that propels projects forward.

Project manager: Frequently asked questions

What does a project manager do on a daily basis.

PMs juggle various tasks daily, including monitoring project progress, talking things through with stakeholders, tackling issues that arise, and tweaking plans to keep everything on track with the project's goals.

What are project management methodologies?

Project management methodologies act as blueprints for navigating a project's life cycle. Agile and Scrum are great for fast-paced, iterative projects. Waterfall and Lean work better for projects with a defined sequence or a focus on minimizing waste.

Why is a project manager important?

A project manager is vital because they act as the bridge between a project's plan and its execution. A PM's core role is to ensure that projects meet deadlines, stay within budget, and adhere to quality standards. Their expertise in managing timelines and resources prevents miscommunication and scope creep. 

What is the difference between a program manager and a project manager?

A program manager oversees a group of related projects, focusing on long-term objectives and the overall impact on the company's goals. A project manager is responsible for the daily operations of a single project. They concentrate on meeting specific deadlines, budgets, and scope. 

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10 Best Project Budget Software to Stay on Track in 2024

Sarah Burner

ClickUp Contributor

February 14, 2024

 As a project manager, have you ever faced any of these situations? 

  • Inaccurate project budget estimates, with small errors adding to the overall budget
  • Watch the expenses creep over your projected total budget
  • Overspending on certain resources and struggling to find additional funds

If the answer is yes, it’s time to find project budget software to suit your needs. 

Your project budget software must help you manage budgets in good times and during stressful times.  You need to have a solution that helps you correct course when you face unforeseen expenses and cost overruns and adjust accordingly. 

Well, the good news is that we have you covered. We’ve researched what to look for in budget management software, the top 10 tools available, and their features, limitations, and pricing. 

Let’s help you choose a clear winner. 

What to Look for in a Project Budget Software? 

1. clickup , 2. rodeodrive, 3. adobe workfront, 4. smartsheet, 6. zoho projects, 7. hubstaff, 9. birdview psa.

Some of the basics that you need to  look for in a project budget management tool include:

  • Intuitive interface: You need a  user-friendly interface and seamless navigation to streamline the budgeting process, such as planning and allocating resources , and managing expenses to improve efficiency
  • Cross-team collaboration: You need a single source of truth for project teams to collaborate and track budgets 
  • Automation: Leverage automation to  streamline your budgeting workflows, assign tasks, and track progress 
  • Security : A cloud-based software with robust encryption and compliance with security certifications will  protect sensitive financial data
  • Third-party integration: Check if the tool integrates with your existing finance tools and accounting platform. Integration with your backend systems, including accounting and HR systems, provides a two-way flow of information for budget collaborators to have access to the latest data
  • Robust reporting:  Manage project budgets and create detailed, customizable reports for stakeholders to deep dive and help in comprehensive financial analysis and informed decision-making
  • Budget Templates: Stay ahead of your deliverables with pre-built project budget templates  

The 10 Best Project Budget Software to Use in 2024

ClickUp’s project management software tops our list of budget tools used by project managers to track project finance effortlessly. The software offers many features that project managers like you look for, including budget templates , robust collaboration features, and adaptability. 

ClickUp Budgeted Project Management Template

ClickUp best features

  • Track real-time progress for budget allocation and spending with the fully customizable finance dashboards
  • Automate recurring actions on a daily or biweekly basis, such as reminders for upcoming payments or billing project resources  with ClickUp tasks

ClickUp Project Budget With WBS Template

  • ClickUp’s detailed Work Breakdown Structure (WBS) template allows you to break down complex projects into more manageable components and supports in mapping out activities in the form of Kanban boards and cost estimates
  • ClickUp AI ’s assistant for budget planners helps write detailed breakdowns of the project scope project and make day-to-day work plans quickly 
  • Perform calculations between numeric, date, and time fields using simple or advanced formulas 
  • ClickUp Goals help accurately track budget goals for projects and visualize progress growth across multiple Goals in one view

ClickUp limitations 

  • Clickup AI is available only on paid plans 
  • Limited ability to track project timeframe 

ClickUp pricing

  • Free Forever
  • Unlimited : $7/month per user
  • Business : $12/month per user
  • Enterprise : Custom pricing

ClickUp AI is available on all paid plans for $5 per member per month.

ClickUp ratings and reviews

  • G2 : 4.7/5 (9000+ reviews)
  • Capterra : 4.7/5 (3800+ reviews)

budget project management

RodeoDrive is a comprehensive project management tool that supports businesses in all project stages, from scoping to pricing. With features such as tracking project goals , project reporting,  resource management, interactive dashboards, and streamlining invoices, it helps team leaders and finance teams stay on top of the entire project cost.

RodeoDrive best features

  • Ability to compare budgeted activities and project expenses with actuals in real-time to reduce spending
  • Lets you sort projects into phases and invoice them separately based on actuals, retainers, or percentage of completion for better planning and project controls 
  • Inbuilt project timeline templates and expense tracking features help budget the project right 

RodeoDrive limitations 

  • The platform has bugs as it is in the early phases of development
  • Detailed budget reports cannot be downloaded 

RodeoDrive pricing

  • Free : $0 per single user per month
  • Achiever : $14.99 per user/ per month

RodeoDrive ratings and reviews

  •   G2: 4.3/5 (6 reviews)
  •   Capterra: 4.7/5 (3 reviews)

Workfront milestones example

A collaborative project management platform, Adobe’s Workfront, helps manage budgets, plans, and actual spending. The native capabilities let everyone involved in the budgeting process, from stakeholders, internal teams, vendors, and network teams, manage and track hard and soft costs, fixed expenses, project costs, and resource costs. 

One major problem that marketers, managers, and stakeholders face is the misalignment between a project’s budget and its execution. 

You need real-time visibility into budgeted, forecasted, and actual costs and how they are performing. Course correction is needed whenever the project extends your allocated budget or actual hours. Manually managing this on spreadsheets is error-prone and time-consuming. 

Adobe Workfront best features

  • Real-time visibility of the planned, forecasted, and actual budget, with the view of current performance in an easily accessible dashboard 
  • Manage and track planned costs, task levels, and resource expenses  
  • Integration with Adobe suite of products helps connect project teams to other parts of the business and also attribute revenue impact effectively 

Adobe Workfront limitations 

  • The software requires users to be trained before they can use it
  • No free trial version 
  • Limited customization options in Workfront’s dashboard

Adobe Workfront pricing

  • Custom pricing

Adobe Workfront ratings and reviews

  •   G2: 4.1/5 (920 reviews)
  •   Capterra: 4.4/5 (1391 reviews)

budget project management

A centralized work management platform, Smartsheet removes the guesswork out of project budgeting. It brings the C-suite and project teams on the same page for planning, tracking, data storage, file sharing, and reporting of project tasks. 

For any new project, you need a central repository that hosts all components of the budget, generates invoices, and allows stakeholders, accountants, and project managers to track budgets diligently and take corrective action when needed. 

Smartsheet best features

  • Access budget management tools for creating and tracking budgets by currency, expense type, or unit of currency
  • Centralize supporting documents like vendor bids in one location 
  • Consolidated key financial metrics on real-time dashboards from multiple sheets into a single view

Smartsheet limitations

  • Does not offer automatic global time tracking
  • No embedded email support 
  • Lacks list view for comprehensive visualization of task levels 

Smartsheet pricing

  •   Free : $0 per user per month
  •   Pro : $7 per user/ per month
  •   Business : $25 per user/ per month
  •   Enterprise : Custom Pricing

Smartsheet ratings and reviews

  •   G2: 4.4/5 (15065 reviews)
  •   Capterra: 4.5/5 (3057 reviews)

budget project management

Setting a budget for any project is challenging, but a well-crafted project budget sets the ground for effective tracking. Harvest’s project management software for small businesses makes creating a tracker for both hours and fees easy. 

Get visibility into the project budget used and what remains in real-time to avoid scope creep before it becomes a derailing issue. Expense management information is critical for budget-proofing your future projects more accurately. 

Harvest provides custom reports to view the tasks that take up your team’s time, issue tracking time, and how it impacts the estimated costs to take corrective actions. 

Harvest best features

  • Turn timesheet data into real-time visual reports to visualize team efficiency, reduce burnout, and improve productivity 
  • Track billable work hours, rollovers and check utilization at a glance and convert billable hours into invoices
  • Integration with popular tools such as Trello, Slack, Quickbooks, and Stitch to provide up-to-date data for project management and budget teams

Harvest limitations 

  • The software needs extensive support to use in the beginning 
  • Does not have access control and permission features 

Harvest pricing 

  • Free : $0 per user per month
  • Pro : $10.80 per user/ per month

Harvest ratings and reviews

  •   G2: 4.3/5 (790 reviews)
  •   Capterra: 4.6/5 (572 reviews)

Zoho Projects

Project managers across the world know that budgeting is not only about savings but also about control. Zoho expense integration allows you to create a profitability summary dashboard with the status of income and expenses in your project. 

Project managers are involved in controlling finances by creating, tracking, and forecasting budgets, tracking expenses, and analyzing reports. Managing all these tasks on different tools that do not sync with each other makes the monitoring process cumbersome for everyone involved in the project. Gain complete control over every stage of your budgeting process with Zoho Projects. 

This project management software offers real-time monitoring capabilities for budgets, threshold and overrun alerts, and planned vs actual reports. 

Zoho Projects best features

  • Manage finances by creating, tracking, and forecasting budgets, billing clients, tracking  fixed and variable expenses, and analyzing reports
  • Track your project budget based on the amount allocated or actual hours spent on projects, milestones, and different tasks over customized project dashboards   
  • Customized alerts for stakeholders when the budget exceeds the planned threshold

Zoho Projects limitations 

  • Does not allow users to create tasks, assign them to team members, and monitor its progress 
  • No mobile application 

Zoho Projects pricing

  • Free : $0 for three users for upto two projects
  • Premium : $4 for unlimited projects, up to 50 users
  • Premium : $9 for unlimited projects, no upper limit on users

Zoho Projects ratings and reviews

  •    G2: 4.3/5 (382 reviews)
  •    Capterra: 4.3/5 (412 reviews)

In large organizations where a team is typically working on multiple projects, you must set budget thresholds for different projects and get alerts in case of overspending. 

Hubstaff workforce management app allows users to set budget limits, get real-time notifications for scope creep and cost overruns, and automate time-tracking for resources. With real-time insights into the expenses, you can ensure you don’t lose track of your budgets.

Hubstaff best features

  • Estimate planned costs based on resource management or the number of hours spent on a project 
  • With the project-level budgets feature, track the profitability of your projects and understand the cost per project and user
  • The project budgets report simplifies budget tracking(in terms of total hours or total actual cost per project) and utilization 

Hubstaff limitations

  • Limited options for task management
  • Navigation is not intuitive

Hubstaff pricing

  • Starter : $4.99 per user per month
  • Grow : $7.50 per user per month
  • Team : $10 per user per month
  • Enterprise : $25 per user per month

Hubstaff ratings and review

  • G2: 4.3/5 (431 reviews)
  • Capterra: 4.6/5 (1432 reviews)

wrike project budget

Budgeting a project requires stakeholders from multiple teams, such as product, marketing, and project management, often spread across the globe, to work in tandem. 

When your project teams are geographically distributed, you need a project budgeting software that can be customized by currency. To avoid communication delays, it should store all relevant documents in one place.  

Cross-functional teams can access these documents and track progress to avoid follow-ups over email and other asynchronous communication channels. 

Wrike’s project management software helps small and medium businesses, startups, and large enterprises manage budget variance and create a budget plan . 

When actual costs vary from the planned, it helps busy project managers investigate the reasons for the variance. Project managers can then identify strategies to manage the budget effectively by reallocating resources or implementing cost-saving measures. 

Wrike best features 

  • Customize the budget with preferred currency settings and set default hourly rates for budget planning 
  • Wrike automates task assignment and distributing resources to ensure budgets are met
  • Integrations with 400+ applications, such as Salesforce, Hubspot, Bynder, Zoom, and Slack to run advanced analytics

Wrike limitations

  • Wrike does not have real-time chat for cross-functional collaboration 
  • You cannot send or receive emails directly from Wrike 

Wrike pricing

  • Team : $9.80 per user per month
  • Business : $24.80 per user per month
  • Enterprise : custom pricing
  • Pinnacle : custom pricing

Wrike ratings and reviews

  • G2: 4.2/5 (3499 reviews)
  • Capterra: 4.3/5 (2523 reviews)

Birdview PSA

Birdview PSA is an online project management tool with enterprise-grade security. For executives, a comprehensive view of the organization’s performance allows a swift response to market changes. Project managers can track progress, identify bottlenecks, allocate resources, and prioritize tasks to ensure the project stays on track. 

 As a project manager at a professional service organization (PSO), measuring project success is based on completion and delivery to clients. 

What if you delivered the project to the client before the proposed delivery date, but it was over budget by 15%? Would you consider it a win? As per Harvard Business Review research , one in every size project has an average cost overrun of 200% and schedule overrun of 70%. 

Bad things happen when you share this news with your clients, as they have to absorb the extra cost. 

Birdview best features

  • Centralized document management to get numbers, timesheets, or project scoping data to create the budget 
  • Get all the project communications and collaboration on one platform and invite clients to collaborate with a guest portal
  • Birdview’s AI assistant helps speed up project management, resource allocation, and forecasting for effective budget planning

Birdview limitations

  • Team management is not intuitive
  • Lacks Gantt charts and planning views

Birdview pricing

  • Lite : $9 per user per month
  • Team: $24 per user per month

Birdview ratings and reviews

  • G2: 4.2/5 (354 reviews)
  • Capterra: 4.4/5 (287 reviews)

budget project management

For medium-sized businesses where clients hesitate to use more advanced tools, Runrun.it is an easy-to-use project collaboration tool. Understand your project data with interactive views and Gantt charts, and monitor your progress with an intuitive tracker. 

Communicate the success of a project with clients using visual charts instead of lengthy reports. With iOS , web-based,  and  Android apps, teams and clients can collaborate on this platform regardless of their location. 

Runrun best features

  • Smart boards help team members and clients track project updates and manage tasks 
  • Create budget request forms with pre-built templates 
  • Save decision history, attachments, and conversations with internal or external users in  one place for better budget decision-making

Runrun.it limitations

  • Limited reporting and analytics features 
  • Calendar interface is hard to understand 

Runrun.it pricing

  • Free : $0 upto five users
  • Business : $8 per user per month

Runrun.it ratings and reviews

  • G2: 4.7/5 (1066 reviews)
  • Capterra: 4.8/5 (141 reviews)

Ready to Create the Perfect Project Budget? 

As a project manager, you know the inefficiencies of manual or spreadsheet-based budget management. 

Here’s a better way to identify cost-saving opportunities and communicate with your stakeholders in an easy-to-understand format. 

ClickUp’s project budget software makes it easy to create a realistic budget plan, track the risks, and adjust costs as per your business needs to avoid overspending. Bringing all your work over a single dashboard using 100+ integrations with other project management budgeting tools. 

Try ClickUp for free to access different templates, views, and customization options. 

Questions? Comments? Visit our Help Center for support.

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How to choose a project management tool

Find the project management tool that's right for you

Man holding a pen to paper

What is project management?

Step 1: what are your business needs, step 2: what is your budget, step 3: what are the challenges, step 4: what features will you need, step 5: how will you measure success, step 6: take part in a trial, step 7: final research, step 8: make your decision.

A good way to think about the average workday is to break it down into a series of projects. Some of these projects will be big, taking place over a series of weeks or months, and some can be completed in a few hours. Some will be worked on by entire teams and others will be personal endeavors. The best project management software can be used across a variety of different tasks and work for a number of different industries.

But with a broad spectrum of project management tools available and a variety of different use cases, picking the right one for your requirements isn’t always easy. That’s why we’ve put together this guide on how to choose a project management tool. There’s also bound to be some overlap with a CRM solution, so don’t forget to check out our list of the best CRM software available too. But if project management is your focus, this article should answer a few questions.

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Preferred partner ( What does this mean? )  

A guide to choosing the right project management tool

First of all, it’s important to set out exactly what we mean by project management . Project management is the application of methodologies, processes, skills, and software to a particular project . This project will have clearly defined goals and a set time frame. This separates it from just management, which is an indefinite, ongoing process.

Project managers require a wide range of skills in order to drive and organize the skills of their team towards a particular outcome. Crucially, there are a number of software solutions that can help with this. We’ve outlined eight step to ensure you pick the right one. 

As with all forms of business software, it’s difficult to know exactly what type of solution you need unless you’ve got clear goals that you want to achieve. Projects can focus on a number of different industries, so you should start by outlining your objectives. That way, you can confidently say why you need project management software.

Although it’s fine to start with broad, big-picture goals like increasing revenue or boosting customer numbers, don’t forget to drill down into greater detail regarding your projects. These more specific project goals include improving communication between teams, meaning deadlines, acting on customer feedback, or improving collaboration .

Once you’ve outlined your business goals, it will become easier to rule out certain project management tools that aren’t relevant. This will make it leave you with a smaller pool of solutions to choose from, focusing your search and making it more likely that you’ll find a tool that suits your needs.

Before you commit to any business tool, whether it’s a an online marketing service or a cloud storage solution, you need to be clear around how much you have to spend. When working out your budget, remember to think long-term, not focusing too much on what your initial costs will be. This is especially important with cloud computing services , which often involve subscription costs paid out monthly or annually. 

With a cloud-based project management tool, your initial outgoings are likely to be small, but it’s important to consider what your ongoing costs might be. These can add up over time and make any solution expensive in the long-term. Also consider if your payment terms grant you access to the entire range of functionality that comes with your chosen project management tool. Some features may only be available to the higher payment tiers, for example. 

Furthermore, don’t discount the great free project management software on the market. These aren’t necessarily inferior for being free of charge. Many solutions, from Trello to Zoho Projects , won’t cost a thing but still provide useful features like scheduling and automation.

There’s no point in pretending that the adoption of a completely new business tool will be without any issues. Getting to grips with your new project management solution could be scuppered by any number of roadblocks. If you make a note of what these might be in advance, you’ll be better prepared for them. 

For example, do your employees have the skills to use your project management tool without additional training or support? If not, what sort of investment can you commit to here - in terms of finances and time? How will your chosen project management tool fit with your existing IT stack? It’s likely that your employees are already used to certain ways of working and particular tools. Will your new project management fit in with these seamlessly or is there likely to be a bedding in period?

Integration is another potential challenge. Some project management tools, like Miro , cite their third-party integrations as one of their core strengths but you might find some issues with others. Often these integrations can be crucial to smooth-running projects including with well-known tools like Slack , Dropbox , and many others.  

The features on offer with a project management tool can vary significantly, so it’s a good idea to compare your needs to the functionality of your prospective tool. Some of the more common features that come with a project management tool include timeline management, collaboration tools, progress tracking and analytics. 

It’s important to remember, however, that you might not necessarily have access to a feature just because it is part of your chosen project management tool. It could be that the feature you’re interested in is only available if you commit to the higher pricing tiers. Automation, for example, is normally considered to be one of the more advance features with any project management tool - but it is also one of the most useful in terms of boosting productivity . It’s a feature that can free your employees of the most repetitive manual tasks so they can focus on adding value to your projects.

Before you choose a project management tool, it’s a good idea to have an idea of how you will determine if it’s meeting your needs. Come up with some metrics to measure how successful your project management implementation is. KPIs you may want to focus on include time to completion, budget variance, customer satisfaction, and risk management effectiveness. 

You also need to make sure you’re collecting enough data so you can be sure whether you’re meeting your KPIs or not. Don’t be too despondent if you don’t manage to meet them with the first project you assign to your project management software. It might mean that you need some more time to become familiar with the tool and it should still serve as a great oppiortunity to learn more about your ways of working.

The best way to be sure you are choosing the right project management tool is to gain first-hand experience. The best way of doing this while protecting your finances is to sign up for a free trial. Many project management tools offer this, such as Liquid Planner , which allows users to enjoy the platform for 14 days before they commit to a longer contract. 

Most of the time, the full range of features are available with the trial version of the project management tool. This means you can try the solution against a number of different scenarios to test its suitability for your business. Note whether the free trial is an opt-in or opt-out service as this will determine if you’ll automatically be charged when the trial period finishes. And make sure you have a way of evaluating whether the trial has been a success or nor before you start.

You’re getting close to choosing your project management tool so it’s time to conduct some final bits of research. A good way to conclude your seearch is to ask individuals and businesses what they think of your prospective solution. Ask them to be as candid as possible, outlining the strengths and weaknesses of the tool. 

As well as reaching out directly, have a look at online forums and review sites to gauge the general opinion around the project management platform. Make sure you seek detailed feedback too - not simply whether a solution gets the thumbs up or not. What doesn’t work well? Have you seen many updates or advancements since you began using the platform? These are all questions that could help inform your choice of project management solution.

Once you've completed all the necessary due diligence is time to take the plunge and pick a project management tool. Take all your research, internal evaluations, stakeholder opinions, and more, collating everything so you can determine which platform is the best fit for your needs. 

However, the decision you make doesn’t need to be a long-term commitment. Monitor how the project management solution is performing and don’t be afraid to switch to another platform if you start failing to meet your KPIs. The right project management tool may change based on your evolving aims. Make an informed decision but always leave it up for review.

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Barclay Ballard

Barclay has been writing about technology for a decade, starting out as a freelancer with ITProPortal covering everything from London’s start-up scene to comparisons of the best cloud storage services.  After that, he spent some time as the managing editor of an online outlet focusing on cloud computing, furthering his interest in virtualization, Big Data, and the Internet of Things. 

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budget project management

A Guide to Effective Capital Project Management

In the dynamic field of facilities management, capital projects are essential for growth and efficiency, and facilities managers play a crucial role in steering these projects from concept to completion. Identifying the most appropriate projects, securing funding and ensuring meticulous execution are fundamental elements in enhancing facility operations. If done properly, these projects can achieve substantial organizational savings. 

A practical walk-through of one approach to capital programming can support facilities managers through the various phases of a capital program. It can offer an approach to effectively identifying projects that align with organizational goals, making persuasive cases for funding and managing projects to deliver on time and within budget. 

This walk-through is not intended to discuss managing facilities projects. Managers understand the way their organizations manage the execution of capital projects. But it should provide a sense of the steps organizations can take to realize the long-term benefits of effective capital programming across facilities portfolios that range from single-building owners to managers of thousand-building portfolios. 

Needs and goals 

The first step in this approach to capital programming is identifying initiatives that will significantly help a facility and an organization. This process is ultimately an analytical approach to evaluating the impact of specific projects on the organization as a whole. In that sense, it does not require decades of facility knowledge to perform well. Of course, the organization benefits from deep facilities experience that can identify potential improvements during this process. 

It is difficult to overemphasize the importance of a complete and accurate data set to this process. Too often, organizations have identified projects from an incomplete asset inventory, or a facilities condition assessment does not relate to a work breakdown structure. While projects certainly can be identified this way, it prohibits an organization-wide view of need. This means organizations often take a squeaky wheel approach to funding, which is almost never the most effective or efficient way to run a capital program. 

Managers can begin by conducting a thorough assessment of a facility's operations and infrastructure. The process does not stop at the condition. Facilities have three areas of need: capital renewal, operations and programming. Areas in which projects could enhance efficiency, safety or productivity need to be identified in the same effort as understanding when to replace a roof. Engaging with staff at all levels can provide valuable insights into the daily challenges and opportunities within the facility. Managers should not shy away from stakeholder engagement. 

Related Content: Making a Case for Capital Projects

Assessing facility needs is likely to be the largest single effort in the capital program. It takes a large amount of time to do well. Working at the right level of detail is a prerequisite for success here. Data used to run a CMMS might not have the same level of detail needed to successfully articulate the need for a particular project. 

Managers must ensure each potential project aligns with the organization's broader strategic goals. Whether the goal is reducing operational costs, improving sustainability, enhancing capacity or a direct relationship to the ability to perform the organization’s mission, each project should have a clear link to these overarching objectives. 

Evaluate and prioritize 

Managers also need to consider the financial implications of potential capital projects. This process involves not only looking at the initial investment but analyzing the projected return on investment (ROI) if one exists. Projects with a clear path to financial benefits, such as cost savings or revenue generation, often stand out in the decision-making process. 

Surprisingly, many organizations in the public space also have revenue generative projects linked to leasing programs, parking garages and housing facilities. Managers should not assume there are no potentially revenue generative projects in their backlogs. 

When considering the ways that the best organizations perform financial evaluations of projects, it often involves a key facilities metric. A facilities condition index is often used. It is also important to consider the cost of ownership extending beyond construction, including system and component renewal along with corrective and preventive maintenance. 

Once a manager has compiled a list of potential projects, the next step is to prioritize them based on their alignment with organizational drivers, financial impact and urgency. This prioritization will help focus resources and efforts on projects that promise the most significant benefits. This can be accomplished through a formulaic approach where weights are ascribed to categories and ratings from the assessment. However, the process is likely to be iterative, depending on the funding stream. 

Making the case for funding 

Identifying the right capital projects is a strategic exercise that sets the foundation for successful project execution. The next step involves building compelling cases for these projects, which is a critical step in securing funding and support. 

Securing funding is crucial in capital project management and involves presenting a compelling narrative to stakeholders. Managers can start by crafting a comprehensive business case that outlines the project's objectives, alignment with organizational drivers, and the tangible benefits it will bring. This should include the results of the detailed financial analysis, showcasing the cost-benefit breakdown. 

Managers can support the case with clear visuals and charts to articulate the narrative effectively. The ability to display patterns that are immediately recognizable is much more successful with a visual element than with a table of figures. Humans more quickly recognize patterns with well-designed visuals than they do with tables of figures. So long as the backup information is available when requested, displaying the narrative this way will not be an issue. 

Related Content: Project Management: Strategies for Success

In addition to financial details, managers can stress the way the project aligns with the broader strategic objectives of the organization, reinforcing its relevance and importance. They should present a well-thought-out risk assessment, highlighting potential challenges, strategies for which risks are present, and tactics for avoidance, mitigation and response. This dual focus demonstrates the project's alignment with organizational goals and the proactive approach to managing potential obstacles. 

Finally, managers should prepare to engage dynamically with stakeholders. This step  involves not just presenting the business case but actively listening to feedback, addressing concerns and answering questions. Being responsive and adaptive to stakeholder input can significantly enhance the persuasiveness of your proposal, and it facilitates the buy-in process. 

Project and program management 

Once a specific project is underway, meticulous management is crucial. This involves adhering to the budget and ensuring the project timeline and quality standards are met. Regular monitoring and clear communication channels are essential, allowing for prompt identification and resolution of issues that might arise. Effective delegation of project oversight for large organizations is critical to success. There is a limit to the number of projects one project manager can oversee. 

Once a project is completed, the underlying data set should be updated. This stage is where organizations most often run into problems. It is also a huge opportunity for organizations to improve their capital programs. When the planning cycle begins, managers should consider the following areas: 

  • Projects accomplished in the prior period 
  • Projects scheduled for the prior period that were not accomplished 
  • Projects scheduled for the current period that should be delayed 
  • Projects scheduled for future periods that should be accomplished sooner. 

As these adjustments are made, they iteratively inform the next planning cycle. When projects come to fruition, the benefits extend beyond the immediate improvements to the facilities. They contribute significantly to the bottom line of the organization, optimizing operations, enhancing efficiency and paving the way for future growth and success. 

The role of directors and managers in this process is not just about overseeing projects but about driving change, fostering innovation and steering their organizations toward a desired future. 

Ryan Small, FMVA, FMP, is vice president with FEA . 

budget project management

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COMMENTS

  1. How to Make a Project Budget: Project Budgeting Basics ...

    Learn the steps to create and manage a project budget, from estimating costs and planning to tracking and reporting. Find out the importance of a project budget, the four project budgeting approaches, and the benefits of using project budgeting software. Download a free project budget template for Excel.

  2. How to manage your project budget

    A project budget is the total cost of all the tasks, activities, and supplies associated with an entire project. It's one number that all stakeholders and participants agree to stick to as they complete project deliverables. But a project budget is also a document that defines exactly how that magic number will be used.

  3. How to create (and stick with) a project budget

    Summary A project budget is more than just money—it's also a spending plan that guides you through the ideation, execution, and delivery of your project. When you master the art of budgeting, you can ensure your team has the resources they need to deliver quality results.

  4. Project Budget Management: Everything You Need To Know

    Project budget management is the process of administering and overseeing the finances related to business projects. It's not only about coming up with a single overall number—say, $20,000 for a particular project to be completed—but about understanding the individual cost elements and the logistics of budget tracking.

  5. Project Budget Management: Steps, Tips, Best Practices

    Project budget management is the process of planning, allocating, tracking, and controlling project resources throughout a project's lifecycle. But creating a project budget that works for you and your client is an art form. It's the profitability of each project that will decide if your business sinks or swims. 💰

  6. Project Budget Management 101: How to Manage Your Finances

    Project budget management is a crucial part of project management. It includes careful planning and estimation, efficient resource allocation, and continuous management throughout the project life cycle. Research shows that only 36% of organizations are likely to deliver projects within budget ( PM Survey 2019 ).

  7. Project Budget Management: A Guide in 8 Easy Steps

    Project budget management is the art and science of planning, estimating, allocating, and controlling the financial resources required to achieve project objectives . It serves as a financial roadmap, guiding project managers and stakeholders through the entire project from initiation to completion.

  8. Project budget: Definition, overview & how to create one

    Project budget, a key factor in project management Managing a project budget is a key stage of project management. It deals with the delicate part of expenditure and financial resources. As a project manager, your goal is to ensure that all of your projects are completed.

  9. The Practical Guide to Project Budgeting

    by Adrian Neumeyer Creating a project budget may be overwhelmin, if you've never done it before. In this article I'll show you the process. Afterwards you'll be able to set up a solid budget on your own. Let's get started. The first question I'll answer is: What goes into a project budget? Labor labor of internal resources

  10. How to Manage a Project Budget in 7 Easy Steps

    Assign a cost to each resource 4. Add a contingency 5. Document your budget 6. Get your project budget approved 7. Monitor (and adjust) your budget 5 Templates for Managing Project Budgets. Budget management has a bad rap: People associate it with boring spreadsheets and lengthy expense reports.

  11. How To Create and Manage a Project Budget Without Stress

    In waterfall project management, the budget is based on the project's estimated cost and deliverables. The budget is divided into phases and milestones, each with a pre-set budget. The project manager oversees regular reporting and monitors progress against predetermined milestones and phases, ensuring the project remains on budget and schedule.

  12. 6 Project Management Budgeting Methods

    Project management budgeting is the action of determining the total funds that are allocated for a specific project. The budget is usually estimated by the project manager along with the project management team and consists of all the projected costs for the upcoming project.

  13. Budgeting In Project Management 101: The What, Why & How

    The definition of budgeting in project management is basically estimating how much a project will cost and then tracking billable expenses as you go. This requires a working knowledge of how long tasks take, what resources you need, and how much similar projects have cost in the past.

  14. Free Project Budget Templates

    Managing Work Budget & accounting Free Project Budget Templates: Simple to Advanced Try Smartsheet for Free By Andy Marker | February 25, 2022 We've compiled the most useful free project budget templates for project managers, professional services teams, accountants, and other project budget stakeholders.

  15. Project budgeting

    Integration management is the tool for successfully developing project budgets. Integration management includes "the processes and activities needed to identify, define, combine, unify, and coordinate the various Process Groups."

  16. What is a Project Budget?

    The Project Budget is a tool used by project managers to estimate the total cost of a project. A project budget template includes a detailed estimate of all costs that are likely to be incurred before the project is completed. Large commercial projects can have project budgets that are several pages long.

  17. Project Budget Template for Excel

    A project budget contains the financial details of your project, including the estimates of all the project costs and the money you need to layout to lead a successful project, from resources to materials. Monitor project expenses with this Excel budget template. It even includes color-coding to let you know when you're in the red!

  18. How to manage a project budget, a step-by-step guide

    Reliable budget management is an important aspect of planning a successful project. The following steps can help you to get your project budget off to a great start: 1. Spend time outlining the project tasks. Before you can calculate your costs, spend time thinking about each task and how you're going to accomplish them.

  19. Project budgeting

    Project budgeting: the key to bringing business projects in on-time and on-budget. Project Management Journal, 25 (1), 35-42. A large number of the problems managers are facing in projects can be traced directly to the use of inappropriate budgeting and management techniques on project efforts. Although the engineering and construction worlds ...

  20. Budgeting in Project Management: Methods, and How to ...

    Learn what a project budget is, why it is important, and how to create a simple project budget using different forecasting techniques. Find out the steps of budgeting in project management, such as estimating, breaking down, adding contingency, and adding milestones. See examples of forecasting methods, such as bottom-up, top-down, analogous, parametric, and three-point.

  21. Project cost management: Definition, steps, and benefits

    Summary. Cost management is the process of planning, budgeting, and reporting project spend in order to keep teams on budget and overall costs reasonable. In this article, we'll go over the four functions of cost management and explain exactly how to use them to improve your project's bottom line. When it comes to project management, there are ...

  22. 10 Free Project Budget Templates in Excel and ClickUp

    It'll help you gather data, create your budget report, enter the data, check for accuracy, and update your info in real time. 8. Excel Project Budget Template by ProjectManager. The Excel Project Budget Template will help you organize the financial details for your project with a simple layout.

  23. What is a Project Manager? Understanding Roles and ...

    A project manager, or PM, coordinates the elements of a project, aiming for timely completion within budget and with high standards. They're the central figure connecting project goals with the collective efforts of their team and help navigate obstacles to guide projects to their goals. ... Project management software also improves how teams ...

  24. 10 Best Project Budget Software to Stay on Track in 2024

    The 10 Best Project Budget Software to Use in 2024. 1. ClickUp. Manage your small business project every step of the way with templates, collaboration features, and over 15 project views using ClickUp. ClickUp's project management software tops our list of budget tools used by project managers to track project finance effortlessly. The ...

  25. Mastering Construction Project Budgeting: Methods, Tools,…

    Project budgeting is an essential element of construction project management. Expenses can accumulate quickly when you don't have a pre-planned budget, leading to overruns and delays. Since it takes an entire team of professionals and suppliers to successfully plan and deliver a project, financial planning in construction is a must.

  26. How to choose a project management tool

    Project management is the application of methodologies, processes, skills, and software to a particular project . This project will have clearly defined goals and a set time frame.

  27. A Guide to Effective Capital Project Management

    Project and program management . Once a specific project is underway, meticulous management is crucial. This involves adhering to the budget and ensuring the project timeline and quality standards are met. Regular monitoring and clear communication channels are essential, allowing for prompt identification and resolution of issues that might arise.

  28. IT Project Management Best Practices

    IT project management is the process of planning, managing, developing, deploying, monitoring or reporting on information technology projects.