- Managing a project budget can be like walking a tightrope.
You want to know what's happening,
but you don't want to hover over your team members,
making them nervous and feeling micromanaged.
To walk that tightrope, you need to understand the need
for the accuracy and precision of your budget.
Let's define these terms
and how they impact your project management.
Accuracy refers to the correctness of an estimate.
Our order of magnitude, budgetary
and definitive estimates are descriptions of accuracy.
In the early stages,
our order of magnitude budget range is broad.
For example, 75% greater to 25% less.
Therefore, the accuracy is low.
But as more project data becomes known,
the range becomes tighter and the accuracy is higher.
While these three estimation descriptors are standard,
you must understand what costs you don't know
and when you will know them.
If you have to send a tender for a product or service,
you won't know the cost until that tender process completes.
For information on types of tenders
and how they affect your estimates,
check out the exercise file.
For example, if that cost is 60% of your project budget,
you can't put out a budgetary estimate
until that cost is known, so accuracy depends on certainty
about the costs to hit your project
and when they'll be understood.
Precision refers to the degree
of exactness associated with the estimate.
For example, an estimate of eight hours
is more precise than hmm, sometime this week.
Sometime this week could mean eight hours or 30.
It's best to be as accurate as needed
for your project, but no more.
For example, you must be more precise
with your time estimates if you have a month-long project.
If something takes much longer than planned,
you don't have much time to recover.
A day or two on a given task won't make that much difference
if your project is a year long, so you can be less precise.
So be as precise as you need to be
to control your project Budget.
Stakeholders want you to understand your budget status.
At the same time, team members don't like to be micromanaged
by being asked to track their time to the minute.
Find the right balance for you, your team, and your budget.
Find that balance so your budget is in control
and you'll walk that tightrope successfully
to the other side.