Project Budget & Status
To evaluate the quality of the project budget and the financial reporting, you as project manager can perform a little candid self-assessment.
Good - I lead the creation of the budget and produce to regular updates of variance and cumulative spending. I create spending projections. For example, the monthly spending amounts are reasonably on target. The projected variance at completion fluctuates modestly from month to month.
Bad - Budget and spending amounts I've produced change over time. Projected spending variance at completion fluctuates wildly from month to month. For example, the project budget and monthly spending amounts vary a lot from month to month for unknown reasons.
Ugly - No budget has been proposed or approved to my knowledge. Projected spending variance at completion is not calculated. For example, we're spending money as needed as we go along.
Lead the project team to create a budget derived from the project plan.
Make sure the project budget contains the following items that are often left off:
- Contingency to recognize the risk of under-estimating.
- Allowance for change orders to recognize the likelihood that one or more change orders will arise during execution of the project.
- Estimate of end-user effort; typically not costed.
Produce monthly update reports showing cumulative spending variance against budget and projected cost at completion.
When the projected variance at completion increases significantly, it's likely time to recognize that some change in project scope or project approach is occurring that needs to be documented in a change order for discussion with the project steering committee.
Successful project managers produce project budget and spending outlook reports.