What is a project’s budget?
What is the process of creating a project budget?
What is included in a project’s budget?
Direct/Indirect CostsDirect cost
Indirect costs
Capex/Opex costsCapital costs
Operating costs
Deliverable/Management CostsProject deliverable costs
Costs of project management
How to Structure Your Project Budget Step 1: Plan how you will document the budget
Step 2: Fill the template
Step 3: Add contingency
Step 4: Add tax
Step 5: Get a Budget Approval
Step 6: Track spending
What is a project’s budget?
A project budget is a financial document that estimates how much you will spend on a project. It includes all expenses necessary to complete the project.
It’s simply the way you answer the question “How much will this project cost?”
What is the process of creating a project budget?
The creation of a project budget requires:
Being able to identify all items that will cost money
A complete picture of what you need to spend
Approval for the amount.
I have had to leave items out of many project budgets. I can tell ya it’s quite embarrassing to have to ask your project sponsor for approval to spend from thereserves. It’s worth taking the time to ensure that your budget is complete.
This article will discuss how to segment costs, how you can find out the cost, and then how to structure your budget.
This guide is most useful for creating project budgets for projects approved or close to being approved. It can also be used as input to a business case.
If you are planning a budget for a proposal, i.e. This article will help you prepare a budget for a proposal.
What is included in a project’s budget?
There are many ways to categorize project costs for your project budget.
Direct costs
Indirect costs
Capital costs
Operating costs
Project deliverable costs
Costs of project management
Your organization may have different ways of looking at cost categories.
Let’s take a look at each one. There are overlaps, but that’s okay. This gives you another chance to make sure you aren’t missing anything.
Direct and indirect costs
First, consider what is a direct and indirect cost to your project. This helps me determine what’s in my project budget and what isn’t. Let’s start with the direct costs.
Direct costs
Your project budget will be dominated by direct costs. These are the items that you need to purchase or pay for to make the project move forward. How do you develop new software? It will require hardware and software licenses. How do you design a new product? You will need to purchase manufacturing equipment and raw materials.
These are the project costs you would think of and are easy to identify. As a prompt, talk to your team to brainstorm all items you need toprocure.
Indirect costs
Indirect costs are those costs that are related to the operation of the project team. These are the costs of running a business and are not usually included in project budgets.
These include salaries, national insurance costs, and tax contributions for those who are involved in the project. These are simply costs associated with having resources. If they are employed staff, you wouldn’t expect them to account for them. Some companies charge cross-charged internal people costs at a flat fixed rate per employee type. Check if you’re not sure.
Indirect costs include heating, lighting, tea bags for the office, refuse collection, and other expenses. These costs are not normally included in your budget unless you are opening a newoffice.
These costs shouldn’t be included in your project budget. If you have any questions or believe they (or some) should be included, please check with your accountant.