Properly estimating the overall budget of a project is absolutely an indispensable matter. Budget should be prepared comprehensively before starting any sort of project activities. Failing to define the budget properly and doing project related activities without being conscious about the money available will inevitably lead towards project failure.
As a competent project manager, you must be extremely careful while preparing the overall budget for any project. All sorts of costs should be included here. For instance, in a software development project, you have to consider properly the infrastructure cost, hardware and software cost, maintenance cost, personnel cost, travel and training cost, network and communication cost etc. The carefully devised budget will not ensure the project success, but it will surely enhance the possibility of avoiding the project failure. This is because of the fact that the budget can be used as a benchmark which you can use for comparing the results of any project activity and finding any protective measures. If you want to achieve the project goals and objectives properly, it is really necessary for you to adhere to the budgetary guidelines and recommendations.
Moreover, as a project manager, you should be careful about involving all the stakeholders in a project. This process is generally known as the participative budgeting. As a team member of the project, the particular person must know his/her job better than anybody else involved in the process. That is why, if that person is consulted when preparing the budget, good and effective suggestions and recommendations must come out. This will be extremely helpful for preparing a good budget. Besides this, it will also improve the morale and self-confidence of the concerned person and better productivity can surely be expected from him/her.
In general, there are 3 factors that are mainly responsible for the budget deficit in a project. Firstly, there may be the case that proper market research or appropriate level of brainstorming were not done while preparing the budget. Inadequate data were collected, research methodologies were not followed properly, and the stakeholders and experts were not consulted in a proper manner. Secondly, too much optimism can be a serious problem for the budget forecasters. Thirdly, strategic misinterpretations may create severe problems when the budget is being estimated.
As a project manager, it’s your prime responsibility to monitor the whole project regularly throughout the project period so that you are instantly knowledgeable about the cost overruns in any project activity. If you are dealing with a project somehow related to infrastructure or technology, then you might experience that the cost overrun is a common phenomenon. You should take corrective measures as soon as any problem arises regarding budget deficit.
If the project manager becomes certain that the remaining activities of the project cannot be finished successfully with the available budget, he/she can take resort to different corrective measures. He/she can renegotiate with the project sponsors for the possibility of increasing the budget or for minimizing the scope of the project. If he/she fails to convince them, then he/she should immediately start minimizing the cost and become totally alert in further activities. The project manager should also make sure that the overall quality of the project is not compromised at any level while minimizing cost.
As a project manager, I always try to find the exact reason for the budget problems. When I discover it, I give my 100% for the corrective actions. It is my tendency not to inform all the team members about the budget crisis so that they do not become anxious about it, which will ultimately reduce their productivity. Rather, I always seek the appropriate ways to minimize the cost from all possible levels. I also strive to negotiate with the top management and project sponsors and try to make them convinced about the necessity to increase the budget. In almost all the cases, I am the successful one.
In short, from the project management perspective, budgeting properly is absolutely a crucial matter. Lots of things in a project are totally dependent on it. That is why, the project manager must give his/her proper attention while preparing the budget. He/she should consult with the top management and the project sponsors, in addition to every stakeholders of the project to make the budget a realistic one. Without giving appropriate attention while preparing the budgetary guidelines and cost estimations, there is no chance that the project will be an ultimate success. Hence, the project manager should always try to give his/her 100% in the budget preparation process, and make certain that all the project activities are being done according to the guidelines set in the budget.