- Working without a project budget
would be like going to a grocery store
and finding no prices on the food.
While you might find what you need,
you might need more money to purchase them.
Project managers build a budget
to avoid the risk of going hungry.
The primary source of the budget is cost estimates,
which are for the resources, tasks,
and equipment purchases needed to deliver the project.
This yields the total budget for the work
you need to produce the project outcomes.
You aren't done, though.
Other essential considerations
need to be added to your budget.
The cost estimates for deploying risk mitigation strategies
must be included in your budget.
These are called contingency reserve funds.
If your sponsor has agreed to a management reserve budget
for the project, include it.
Management reserve is funding to address unexpected issues
not identified in risk mitigation, but let's not stop there.
Good project managers take extra steps
to refine their budgets.
For various reasons the costs of products
and services will change.
Distribution costs might increase
during the end of the calendar year holiday period.
If shortages of a required product are forecasted
then consider that in your budget.
To address this, I'll examine cost history,
and calculate the likely cost differences.
This process is called regression analysis.
And you take factors like time of year or availability,
and estimate the impact they might have on project costs.
Another analysis approach I recommend
helps you manage your budget as you execute your project.
Creating a time-based cost allocation
shows you when money is projected to be spent.
This is usually compiled on a monthly, or quarterly basis.
That way you can track how your actual cash outlays
map against your plan.
A sample time-based cost allocation line chart
is included in the exercise files .
Before finishing the budget, I recommend one more action.
Review the costs outlined in your budget,
and the expected benefits for your project.
Ensure your project will deliver value to the business.
You want your costs to be, at most,
the benefits you receive.
Follow these steps to forecast your budget
and you'll bring value to the business.
Unlike my crisis at the grocery store.