Projects are long-term activities that may stretch over several annual budget periods. The term "project" is used to indicate, for example, the construction of a building rather than a one-off major purchase, normally covered in the capital budget. The project budget for a long-term project is difficult to prepare for several reasons, including the issues of cost escalation and design changes. No project will go exactly according to plan. Flexibility and possible re-planning have to be built into the project budgeting process. Hence, the project budget is essentially a control mechanism to give the organization an early warning about the potential for cost and time overruns.
Project Budget FAQs
A project budget is a budget for an activity or group of activities that are undertaken in the course of business operations to perform specific function.
This is scope of money which will be spent on particular item during project. Scope may consist materials, labor, equipment costs, travel expenses, etc.
The primary benefit is that it provides a good basis for controlling the costs of projects to ensure that they are in line with original projections when set out in the business case. It can also be used to communicate the requirements in terms of resources and equipment needed for a project.
Project budget is not easy to prepare. It should include all foreseeable cost and time overruns. It should be reviewed and updated on a regular basis.
Factors that contribute to cost overruns can be broadly classified into two categories: - Technical factors: This includes factors such as changes in design, technology, or site conditions. - Managerial factors: This includes factors such as delays in decision making, inadequate planning, and unrealistic deadlines.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
