Overseeing the budget of just one complex project can be a big job. Managing budgets across an enterprise’s entire project portfolio is a serious undertaking. Executives need to maintain a portfolio-level view of budget activity to swiftly identify where financial performance is falling behind and proactively adjust resource allocations to help sidestep looming budget trouble spots. The right approach to project portfolio budget management safeguards funds for high-priority projects and helps stakeholders at all levels navigate the interdependencies between strategic initiatives.
If managing and monitoring hectic project budgets has been challenging for your leadership team, consider these strategies executives can use to identify and mitigate financial issues earlier and with fewer unknowns using a portfolio-level approach to budget management.
Building a portfolio-level view of budget forecasts and variances enables executives to see where projects are underperforming financially or exceeding their budget outlay projections. This visibility also allows for balancing financial resources across projects based on priority. If a top-priority initiative encounters a budget setback, it may be necessary to reallocate funding away from lower-priority efforts to ensure the project with the most significant impact can achieve its goals.
A thorough review of the portfolio assists in identifying and understanding any budget interdependencies that may exist between projects. That includes initiatives planned to run concurrently and those expected to launch after current efforts are complete. Overages in the near term may reduce the money available to drive immediate needs in other dependent projects. Similarly, downstream budgets that rely on today’s project performance could experience funding deficiencies if current initiatives fall short.
As each project moves through its lifecycle, the senior leadership team should monitor cascading budget impacts across the portfolio. If one initiative runs into unexpected budget trouble, the ability to swiftly adjust expenditure levels in other projects could mean the difference between pausing an effort due to a lack of funding and resequencing activities to maintain progress until the deficit can be addressed. Knowing where these tradeoffs can be made most efficiently and with the least effect on overall project expenses allows the team to implement the necessary steps quickly.
A shared set of universal key performance indicators (KPIs) may also be useful for measuring budget performance across the portfolio. This removes concerns about potential bias, such as when an executive has a bigger (or more personal) stake in one project over another, and it provides a bright line to help the leadership team spot trouble early. By applying consistent thresholds for financial performance and budget variance, executives can more quickly move to address financial difficulties and restore the project to a healthy budget track.
Monthly portfolio financial health checks can help senior staff maintain awareness and build greater familiarity with the ebb and flow of typical project lifecycles. Executives can make more informed decisions when they understand the natural progression of complex or long-duration projects, and they’ll also build skills in reviewing resource allocations across multiple projects and assessing the effectiveness of those allocations. The leadership team can use these skills to review and adjust strategic priorities, provide more meaningful insight during the early budget development process, and know when it’s time to tap other resources—contingency funds, additional funding sources, etc.—to keep priority projects on a successful path. Executives should also consider whether shared funding pools make sense and how those pools are best disbursed. Perhaps they’re reserved for contingency funding, or business leaders may decide to earmark a portion for potential overages associated with specific activities that can be difficult to forecast, such as extended regulatory review requirements or multiple rounds of testing on mission-critical software.
PMAlliance, Inc uses a team of highly experienced and certified professionals to provide project management consulting, project management training and project portfolio management.