Sunday 2 January 2022

How to set a project budget ! ensure stable operation of the project with accurate estimates!

The project management budget estimates budgets are essential for promoting projects, but we will focus on how to create those budgets.

even if you understand what the budget requires, the resources you need to secure in promoting the project, etc., it can be surprisingly difficult to put it into practice.

As a project manager, it is also important to know how to deal with management.
when it comes to budgeting, it's more important to have the budget you need, thinking ahead, than asking about the complexion of management and your customers.

In order to properly communicate to management, it is important to have data and materials that will be the basis for that.
it is no exaggeration to say that when the budget is decided, you can see the success or failure of the project, so i will introduce what to know.


1. three types of estimated accuracy

each project estimate has different accuracies, and can be divided into three types during the creation phase.
the following is the details.

1-1. super approximation

sufficient experience is essential to create a super-approximate estimate for the estimates that you create during the project definition phase.
if you have experience, you will be able to intuitively extract your project budget.

1-2. approximate estimate

this is also created during the project definition phase, as is the super-approximate estimate.
level that you can create if you have worked on similar projects in the past.
also known as a "coefficient" estimate.

1-3. detailed estimates

the above two types of estimates are created in the definition phase, while detailed estimates are created in the project planning phase one step later.
once in the planning phase, all the cost estimates are summarized and detailed estimates are available so that all the work on the project is planned.
depending on the project size, it may take several months to create a detailed estimate.
also known as "bottom-up" quotes.

in both cases, it is important to properly state the basis for the estimate.
in particular, management often looks at the budget with suspicion that estimates are inflated, so it is necessary to clarify the basis for budgeting so that it can be answered accurately even if something is pointed out.


2. know the category you need to budgetonce a budget is approved, it can be very difficult to change it.
if you add resources outside your budget after the project starts, management won't shake your head vertically.
therefore, it is important to properly acquire the necessary resources during the budgeting phase.

to do this, you must first understand the budget category you need.
the work that the project team does primarily represents a significant portion of the cost, but the other costs must also be calculated appropriately.

below are the details of the category to be budgeted.


2-1. labor cost

First of all, labor costs are the most expensive in the business, not just projects.
There are many overlooks or calculation errors in internal labor costs.
Many projects include employees from departments such as accounting, information technology, market research, and marketing.

you need to budget the salaries of the members involved in the project and understand the actual state of the budget appropriately.
labor costs are sure to be a big weight for any project, so this is a cost that should be calculated accurately over time.

2-2. external labor and goods costs

we also budget the costs of people and goods procured from outside the company.
it is not uncommon for outside people to participate in the project, such as the procurement of partners and temporary employees to complement the weaknesses of the team, and the use of consultants who will be the guidance of the project, so it is necessary to consider such external labor costs.

2-3. cost of in-house equipment

the cost of in-house equipment is also included in the calculation.
for example, computers, printers, and copiers.

depending on the number of participants in the project, office space may also need to be considered.
for example, if a project team member uses the space previously used by the human resources department, the hr department will move to another space, so the cost must also be calculated for the project.

2-4. cost of goods

paper, pens, and many other office supplies are required to proceed with the project.
it is necessary to decide whether to include such expenses in the budget, but it can be said that it is one of the expenses to consider.

2-5. travel expenses

if a team member needs to travel, transportation, accommodation, food, etc. will be recorded as an estimate.
create a project budget by calculating the appropriate estimated price, including these expenses.


3. gain a better understanding of direct and overhead costsbefore you go into cost consideration, you need to understand the difference between direct and indirect costs.
the project budget consists of these two types of expenses, and the direct cost is simply the cost of the project.

  • overhead, on the other hand, is also used for projects, but it includes not only one project, but also the cost shared by many projects across the company.
  • for example, the cost of the human resources department involved in recruitment can also be called overhead costs.
  • we don't just hire members of our own projects, we also hire members from other teams, so it's an overhead expense shared by many projects.

here are some key examples of direct and indirect costs used in projects:

3-1. direct fee

labor costs: the cost of the members participating in the project. employee welfare expenses are on a case-by-case basis, and may be direct or general administrative expenses.

raw material cost: the cost of the raw materials used in the project. pens, paper, etc. are applicable.

equipment cost: the cost of the equipment used in the project. computers, printers, copiers, etc.

legal expenses: legal costs incurred on a project.

travel expenses: travel costs related to the project.

education and training expenses: training costs for newcomers and team members, and user education costs when the system is introduced and implemented.

marketing and advertising expenses: the cost of introducing, advertising, advertising, promotion and public relations of the project. in particular, there will be a reasonable cost for new product introduction projects.

3-2. indirect charges

facility fee: common equipment costs such as office space, network, intra, etc. used by the project team. in some cases, an office may be rented exclusively for the project, but in that case, it will be recorded as a direct expense.

management and general administrative expenses: costs for managers and employees who can indirectly support the project (e.g., the cost of hiring hr staff)


4. 4 things to keep in mind when budgeting

4-1. report to management after the budget estimate is complete
at first glance, it may seem obvious, but there are cases where this is not possible unexpectedly.
for example, when a project manager happens to be passing by in a hallway with management or working together in an elevator, he or she might be asked what the budget is for the next project.
in doing so, we sometimes give in to the pressure of management and answer appropriate numbers without carefully considering the budget before completion.

it is undeniable that the figure may walk alone at the management meeting and decide the budget in the meantime.
in order not to do so, if management is asked about the budget when the estimate is not complete, it is important to properly communicate that it is under consideration.


To create a project budget, you need the resources to help you do so.
WBS is the basis for this, and you need to know in advance how many days it will take to do what work will take, and how many months will it take for the entire project.

To create a WBS, you must define your project properly.
Inaccurate project definitions can result in poor project definition, which can't be broken down into units of work, making the entire project optimistic and risking not being able to secure the budget you need.


4-3. place members in the right place

even if the project plan is completed, it is the project members who actually carry out the project.
it's important to leave the work to the full potential of the team.

For this reason, it is essential to formulate a second WBS, and by dividing it into units of work properly, it is possible to smoothly assign members.
For example, it is necessary to assign such members to tasks that require a high level of expertise.

having the right people in the right place increases the likelihood that your project will proceed on time, so it's important to plan as necessary to ensure you have the people you need in advance.

4-4. risk management

risks are inherent in promoting projects with limited resources such as schedules, members, and funds.
it is necessary to appropriately conduct such risk assessments and take measures such as securing a large budget as necessary.

getting additional resources after a project starts is much more difficult than the budgeting phase before the project starts, so it's important to have more resources in advance if you can properly explain it to management.

instead of stepping on the back, risk management is the key to project success.




The project budgets are a constraint and a risk.Budget is essential to promote the project, but if you make a mistake, it will immediately fall into the red, it is a dangerous figure.

Even in new product development, the project manager's measures are constrained by budget.
as a manager, it's your role to discuss whether it's the right budget and not give in to management.
even if you know that funds are insufficient during the budget review phase, you should not drink the budget because you want to see the happy faces of management and customers.
it is not too late when the project is successfully completed and the product is delivered.

It's important to understand what the project means and think about what's really important.

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