Basic budgeting principles for a detailed project

Blog posts are not great for long documents, so we’ll focus on basic principles to use when preparing a project budget.

Is the project part of a series of similar projects? In this case, project history can be used as a reference. For example, if I need to perform an assessment to automate an assembly line for a canned food factory and I’ve done similar assessments in other factories before, the data from previous projects would be invaluable to prepare the new project’s budget. Not only will the budget be more reliable, but we’ll also be able to plan where potential problems may arise.

Is this project for an existing client? Do we know this client well? A client’s history allows for more accurate budgeting, since we know how to work with the client, we know their preferences and their requirements. If we don’t know this client, we’ll want to add a risk factor in the project budget, to allow for adjustments to the new client’s unknown requirements.

Once we know the project and client, our next step is to make a detailed planning of the tasks that need to be completed in order to deliver the project.

When tasks have been defined, we can assign them to the people who have the optimal expertise and experience. For example, we can assign junior employees to less technical tasks, and senior engineers to critical steps of the project. This way, we’ll be able to control our costs.

We also need to estimate the time required to complete the tasks, including “slack,” which is additional reserve time to address problems or “surprises.”

We’ll also want to plan for contractors and equipment needs, along with other expenses, such as mileage or other travel expenses.

If we have many tasks in our project, it may be logical to group them under phases, which creates a structure for the project and also facilitates invoicing: when a project phase is complete, we can invoice it. No need to wait at the end of the project.

With a detailed budget like this, we’ll be able to provide a much more accurate quotation and also increase our control over costs. With a cost management system like Abak 360, it will be easy to prevent and address cost overruns at the phase or even at the task level, rather than for the entire project.

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