How do i budget my project?

When making a budget for any project, it is necessary to take into account all the costs of its implementation. Proper budgeting is the key to the successful implementation of plans and tasks.

Track the project budget on your mobile phone.

items of expenditure,
process execution time,
types of work,
cost centers, etc.

The structure of the budget is determined by the chart of accounts of the cost accounting of the project: the traditional (accounting) and / or specially developed for a specific project plan of accounts of management accounting. But in any case, the budget of the project consists of an estimate of income and an estimate of costs. In turn, the cost estimate includes a management reserve, an estimate of unforeseen costs and a basic, operating budget, which is a set of expenditures on resources that can ensure the implementation of design work.

Types of budget by project stages

The stage of defining the concept of the project. Here, the volume of budget expectations is formed, determining the needs for finance and preliminary planning of potential payments. The magnitude of the error of such planning is the largest in comparison with other stages - 25-40%.
Justification stage. At this stage, simultaneously with the feasibility and investment justification, a preliminary budget of the project is formed with an error of 15-20%. The budget justifies the items of expenditure and the need to attract financial resources.
Stage of negotiation and conclusion of contracts. After the completion of tenders, negotiations and the conclusion of contracts, a specified budget is planned with the involvement of suppliers and contractors. Due to this, the budget error at the stage is no more than 10%.
Documentation development stage. In this phase, a final budget is adopted and a directive limit on the use of resources is imposed. In such a budget, there may also be deviations, but they are only about 3-5%.
Stages of project implementation and its completion. At these stages, we are talking about the actual budget, when there is a practical management of the cost with minimal errors.
In general, the evolution of budget creation demonstrates the transition from estimated (preliminary) budget indicators through official ones to adjustable current and actual values.

After feasibility studies, it is premature to immediately form policy budgets. (At this stage, they are evaluative.) And only after coordination with stakeholders and participants is a formal reference document approved, with which the actual process is compared. If previously planned indicators differ from actual deviations, deviations should be reflected in the budgets in a timely manner. And at the end of the project, the outcome document should reflect the final real values.

Investment activity of the company

Investment budget In this part, the budgeting of the company's activities concerns its financial sphere, based on the investment strategy. Here, the budget system works as a functional subsystem that solves complex financial problems of planning, control, motivation, regulation. The system allows you to directly manage cash flows in close connection with the work of the system for the implementation of technical and economic standards. But the main task of investment budgeting is to draw up a financial plan that would take into account the costs associated with the development program of the company as a whole.

It follows that:

first, the composition of strategic initiatives leading to the choice of optimal growth paths is approved,
then – a list of projects corresponding to them, forming a new model of the project composition, which, as a rule, is associated with an increase in the share of innovations, then – investment planning aimed at minimizing financial losses.

The system of balanced budget values is presented in the form of strategic maps and a set of key performance indicators, on the basis of which the relationship between the investment budget and other budgets of the financial system is demonstrated. These include:

the budget of revenues and expenditures, with which the planned values of investment budgeting resonate,
borrowing budget,
cash flow budget.
construction and commissioning of capacities,
procurement and acquisition of basic production assets, allowing to expand the reproduction of existing capacities,
implementation of planned portfolio investments, which are possible through the use of financial instruments (contributions to authorized capital, securities, etc.).

The results reflected in the plan affect the forecasts, helping not only to implement dynamic modeling of financial flows, but also to predict the main values of the project's effectiveness.

Local project budget

From the previous aspect, the budget of the local project differs in the tactical period of implementation of the project portfolio. In this aspect, we are talking about:

about the model of financial transactions of a certain type, which are carried out in parallel with project events throughout the life cycle,
about the real financial flow, which includes the receipt and exclusion of cash in the course of the implementation of a long-term unique task.

This planning is carried out by personnel management services, capital construction units, procurement and sales services with the involvement of technologists, coordination with economists, accounting and taxation specialists. Thus, the structure of the project budget can be described by the following relationships:

At the operational level:

the receipt of proceeds from the sale of funds is correlated with the calculation of the production program,
disposal of funds for operating expenses – with the calculation of current costs,
payment of interest on bank loans – with the calculation of debt servicing costs,
payment of taxes – with the calculation of profit.
At the level of investment activity:
sale of non-current assets (surpluses) - is built according to the schedule of disposal of fixed assets and correlates with the calculation of the need for investments for the formation of current assets,
investment in permanent assets – with an estimated calculation of the cost of equipment and construction and installation works,
investing in current assets – with the calculation of investment needs related to the formation of current assets.

At the level of financial activity:

receipt of share capital is correlated with the planning of the issue of shares (securities),
repayment of debt on borrowed funds - with the calculation of the cost of servicing and payment of the principal debt,
obtaining bank loans – with the calculation of borrowing needs,
payment of dividends – with the planning of the dividend policy as a whole.
Production activity becomes a component of the operational cycle of economic activity. When included in the project budget, it reflects the receipt and disposal of money.

Project Budget Model

Before the project budget is drawn up, a project plan is developed to help you obtain data for the consolidation of financial budgets. Such a plan should include a list of stages and dependent activities with an indication of the exact timing of their implementation. In addition, prior to the preparation of budgets with specific amounts, the resources necessary for each activity of the plan are determined: Microsoft Excel.

The list of resources consists of labor and material resources. For the former, units of time and cost (the price of an hour of work) are determined, for the latter - units of measurement and cost.
Linking resources to project activities involves specifying the resource name, duration, and volumes in specified units of measurement. Partial use of labor resources allocated for certain activities may be planned. In this case, the workload is conveniently indicated as a percentage (of the maximum 100% of the load). So, for example, with a 50% load, the calculation of costs for the event assumes the following scheme: the employee's wage rate is multiplied by the timing of the implementation of the event, and the resulting value is multiplied by 0.5.
The cost budget for the project is calculated by multiplying the resources used by the cost for each activity.Further, in relation to the timing of implementation and activities, the need for material resources for each material is calculated, after which the information is consolidated taking into account all projects and included in the consolidated budget plan in terms of the purchase of materials. Such calculations are also used to control the actual consumption of materials.

For example, on construction projects, specialists of production and technical departments monthly check the documents for all projects, taking into account the write-off of materials. This can be done only if the amount of work is clearly tied to resources.

Without such a binding (with separate control of only the amounts being spent), the foremen can adjust the incoming data so that formally the amount calculated according to the SNIPs and price conversion coefficients coincides with the cost of the materials being written off. In the absence of an integrated planning model in the company, even in the event of exhaustion of materials on one project, they can be illegally taken from another with the manipulation of information in the documents for write-off. In the case of a regular launch of new projects by a company, such a manipulative "scheme" can exist for quite a long time without being detected.

When coordinating the budgets for all facilities with the financial budgets, it is necessary to take into account the strategic indicators of the company as a whole, since it is possible that the requirements for the implementation of a separate project will conflict with the requirements on the scale of the company's overall project activities. For example, the decision on a loan for a particular project may be unprofitable, since it will reduce the profit on the project, but justified from the point of view of the development of the company as a whole.

How to make a budget yourself

The project budget should be financially sound, realistic and correctly calculated. It is necessary that the planned costs fully correspond to the expected result. It is drawn up in accordance with a certain form and taking into account the requirements of the grantor. In most organizations, the project budget includes the following sections:

remuneration;
basic direct costs;
indirect costs.

In this document, for example, in the Microsoft Exel table, there should be only those items of expenditure that are required for implementation. The main steps for self-creation of a project estimate are as follows:

You need to write down all the goals and objectives set for the implementation of the project. They need to be prioritized.
You should identify the resources that are required to accomplish each goal and objective. You need to calculate their cost.
All actions must be distributed by months, weeks, days.
You need to calculate the amount spent monthly, weekly, daily.
If necessary, you need to break down costs by function. Separately calculate the resources needed for different areas of activity.
It is necessary to determine the sources of financing. For example, these may be trust funds, external resources and other sources.
Next, you need to coordinate the budget with the company's management.
If necessary, then after negotiations with the authorities, it is necessary to correct the document, excluding from it the tasks of the lowest priority.

The items of expenditure in the budget and the required resources may be approximately as follows:

remuneration of full-time employees, experts, consultants;
expenses for contracts with other companies, payment of taxes;
costs of renting premises, utility bills;
travel and transportation expenses;
the cost of consumables and equipment;
payment for editing, reporting, printing, translation;
postage, telephone costs, internet.
Before starting to distribute funds to budget items, it is required to study the tax legislation. You need to find out the features of the preparation of financial statements in your region, so that after there are no problems and unforeseen expenses for taxes and other payments.

How budget compliance is monitored

If you need to perform a new task, you need to make a cost estimate for this and see if it is consistent with the previously finalized amount. If a discrepancy is detected, you will need to work on taking action for the "Change Request".

You also need to effectively manage time by tracking the timing of work. If they are delayed, then you will have to incur large costs that exceed those previously established. You need to remind your managers to ensure that the work is done on time.

It is necessary to control changes in the project. You need to try to make sure that in the course of its implementation there are as few of them as possible. After all, they will affect the timing of the work and, accordingly, more efforts will have to be made, which means that the cost of work will be higher.

How adjustments are made

Almost no one can develop an accurate and real budget on the first attempt. It definitely has to be adjusted. This happens after the manager initiates its change. To ensure that the project falls within the framework of the financial plan, the following measures can be taken:

reduced funding for non-priority work;
reduction of the labor rate or the price per unit of material resources;
replacement of resources intended for work with cheaper ones;
reducing the duration of certain types of work.
After the program has been adjusted, the document is checked by the project manager, and if everything is in order, approves it.