Is Bad Budgeting Causing Your Project Problems?

Aligning your project’s funding with the overall scope, stakeholders’ expectations, and the resulting activity lists can be a challenge. The project management consultants at PMAlliance know that getting sponsors and executives to nail down what they want the project to accomplish is sometimes a feat in itself. Once your team gains consensus on the deliverables, you can then assign costs to the various line items and flag any unknowns that may require contingency funds to help cover them.

But some teams struggle through project after project, watching their budgets fall apart despite strong support from sponsors and funding approvals that appear both realistic and workable. If your budgeting process seems solid but your team still runs out of money or encounters other funding issues, take a step back and review where your dollars are really going. You may be surprised to trace your project money management troubles back to budget mistakes you didn’t even know you were making.

Are you paying to overcome failures in the core project planning process?

It’s true that money can’t fix everything, but it can fix some things, and compensating for poor planning practices is one of them. There are examples everywhere of project teams furiously throwing money out the door in an attempt to solve wider project management issues. Are your staffing projections consistently low because you spitball them? Some teams pay big sums for last-minute contractor support instead of gathering and applying real-world figures to develop accurate personnel forecasts at the outset.

Whether it’s plugging knowledge gaps, cleaning up sloppy practices, or compensating for insufficient attention paid to the planning process, money spent in these areas is essentially waste—and it adds up fast. If your team blasts through project budgets because you’re repeatedly fixing problems that could have been avoided with a better core planning process, consider adopting a proven project management methodology that puts you on the path to success.

Are you spending money to compensate for project delays?

One common example of an expensive (and unnecessary) delay is when orders for key materials or equipment are placed too late, due either to insufficient monitoring of critical-path tasks or a lack of information needed to finalize procurement request details on time. In both instances, the end result is often that you must pay rush charges for shipping or fork over fees to jump ahead in the order queue.

Project delays can also turn spendy when tasks fall behind and you rack up additional vendor visit charges rather than combining everything into just a few cost-efficient trips. You can protect your budget by improving your project plan development techniques and implementing project controls to ensure that tasks stay on track and any potential delays are flagged in advance so you can proactively address them.

Do you rely on contingency dollars too much?

Contingencies are an important and legitimate element in the project budgeting process. These line items should link directly to specific activities or resources within an initiative. They must also reflect—with real-world figures—the potential need to deal with discrete unknowns once the project gets underway.

If you manage contingencies by writing down the biggest number you think will get approved and then burning through it without fail, your team’s budgeting process need a reboot. For every activity in the project, you need participation from the right cross-functional teams and subject matter experts to gather accurate insight and develop contingency figures that are realistic, defensible, and appropriate. An excessive reliance on contingency dollars to cover routine project activities is a warning sign that your budgeting process doesn’t follow best practices.

PMAlliance, Inc uses a team of highly experienced and certified professionals to provide project management consultingproject management training and project portfolio management.

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