Good project management means a sound budget management plan

Blog: Monday Project Management Blog

Your budget is your financial plan. It’s your best estimate — often based on historical data — of how you will spend your money.

Budgets are usually defined by a set period of time, most often a year — either a fiscal year (sometimes Jul 1 – Jun 30, but can be any 12-month period) or a calendar year (Jan 1 – Dec 31) … though you can really have a budget for any period of time — a week, a month, a year, 3 years, etc.

At a high level, budgets are composed of income (money coming in) and expenses (money going out). Most budgets will break income and expenses down into more granular details.

Depending on the industry, company size, and sophistication level, budgets can also include planned/expected sales volumes, resource quantities, cash flows, and other assets and liabilities.

Note: If you want to see a really complex, detailed budget, federal government budgets are the answer!

For corporations, budgets are often created and maintained for each team/department and then rolled up into the overall company budget.

How does budget management play into fiscal planning?

Budget management is simply the process of managing a team/department/company budget.

Managing a budget means that every so often (monthly, quarterly, semi-annually), teams review and re-evaluate where their team is in relation to the budget.

A budget monitoring report is a report that is most often used. This financial report displays actual income and expenses for a set time period compared to the predefined budget for that same period. This “Actual to Budget” report is critical for teams to understand if projects are still on track, enabling them to pivot and adjust as necessary.

This report, if used effectively, also allows for teams to access where they can (a) spend more money or (b) start to trim down expenses. One goal of an “actual to budget” report is to not be presented with any big surprises at the end of the budget period.

The key to budget management is a constant review, tracking, analysis, and tweaking along the way.

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Good project management = sound budget management: 3 steps to ensure success.

A key component of managing projects well is ensuring you manage your budget.

Said another way, you can’t be good at project management without being solid with budget management — they go hand in hand.

In fact, budget management — specifically budget restrictions and changes — is one of the 10 most common project management challenges.

So how does one become a “good budget manager?”

Step #1: Scrap the pencil and paper and use software

It’s 2021. There is no need to pull out your #2 pencil and 8 1/2 x 11 piece of lined paper. Instead, open up your favorite spreadsheet software and get to work.

Speaking of software … the Project Management Institute found that 66% of companies that use software stay within budget on projects.

Wait a minute. This is monday.com. We don’t use just ANY software here (and especially not basic spreadsheet software). We have a template (and a board) to make your life easy easy easy.

Grab the monday.com Budget Tracking Template to get a clear picture of your budget and easily plan your future spendings:

This template helps project managers stay on track and within budget. Real-time views show how much has been spent in comparison with how much is left to complete.

Step #2: Avoid scope (and therefore budget) creep

Budgets will inevitably change. Since budgets are created as best (ideally educated, data-driven) estimates, it’s nearly impossible that all projected incomes and expenses will line up perfectly.

But beware of scope creep. Do not let it undermine your project (and budget).

When scope starts to creep while managing a project, the budget is also impacted. Budget management becomes essential, a risk that must be addressed — and avoided.

As projects evolve over time, it’s inevitable that budgets will change. That’s normal. That’s okay. Managers may request more funds or stretch out the money she or he has to work with.

Project managers must plan their budgets accurately and ensure that projects remain within budget. They should adopt efficient cost management strategies to prevent straying from the agreed-upon budget.

Step #3: Track cost variance

No budget is perfect. It’s an educated (data-driven) best guess — based on historical numbers and future predictions.

While the goal of any budget is to keep actuals as close to budgets numbers as possible, variance is normal, and expected.

Cost Variance: the delta (difference) between actual cost and projected/budgeted cost; what you expected to spend versus what you actually spent.

As we detailed in Cost variance: a quick tip to keep projects under budget, there are (at least) 3 ways to help keep projects within budget:

1. Spend the time upfront to understand project needs: Take time before you launch a new project to truly understand the full scope of the project.

2. Plan for the unknown: All sound budgets consider the unknown, the unexpected. Depending on your specific project, there can be many factors outside of your control that can have a huge impact on your budget. Plan plan plan.

3. Manage change: Alongside planning for the unknown, it’s also essential to be able to manage this change when it happens — and it will happen.

There are certainly other factors to consider when managing your budget, but the above three are arguably the most important.

How monday.com helps with budget management

monday.com’s Work OS is the platform for the future of work. Our cloud-based software platform is where teams build custom workflow apps, empowering teams to plan, run, and track processes, projects, and everyday work.

Geared for organizations of all sizes and across all functions of the organization, the monday.com Work OS provides the flexibility to build and adapt to any workflow, project or process.

Our answer to getting started is to download one of our many (many many) fully-customizable templates — your starting point to help with budget management.

This help article details the process for managing your budget in monday.com.

But there is no need to take our word for it. Sign up with monday.com today and grab your first template. We have a 14-day free trial … no credit card necessary.