As a project manager, you create an initial budget for your project. As your project continues you may find that your budget needs to be updated. To refine your budget as your project moves through its different stages follow these steps:
Prepare a rough order-of-magnitude estimate in the starting the project stage.
Use this estimate to decide whether the organization should consider your project further by entering the organizing and preparing stage.
Rather than an actual estimate of costs, this number often represents an amount that your project can’t exceed in order to have an acceptable return for the investment. Your confidence in this estimate is low because you don’t base it on detailed analyses of the project activities.
Develop your detailed budget estimate and get it approved in the organizing and preparing stage after you specify your project activities.
Check with your organization to find out who must approve project budgets. At a minimum, the budget is typically approved by the project manager, the head of finance, and possibly the project manager’s supervisor.
Review your approved budget in the carrying out the work stage — when you identify the people who will be working on your project and when you start to develop formal agreements for the use of equipment, facilities, vendors, and other resources.
Pay particular attention to the following items that often necessitate changes in the budget approved for the project:
People actually assigned to the project team are more or less experienced than originally anticipated.
Actual prices for goods and services you’ll purchase have increased.
Some required project nonpersonnel resources are no longer available when you need them.
Your clients want additional or different project results than those they originally discussed with you.
Get approval for any required changes to the budget or other parts of the approved plan before you begin the actual project work.
Submit requests for any changes to the original plan or budget to the same people who approved them.
Monitor project activities and related occurrences throughout the carrying out the work and closing the project stages to determine when budget revisions are necessary.
You may not personally participate in all aspects of developing your project budget. If you join your project after the initial planning, be sure to review the work that has been done on the budget and resolve any questions you may have and issues you may identify.