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Budgeting your project is one of the most important parts of the project planning process. Properly budgeted projects will often come in at or under budget upon completion. By putting in adequate time during the planning process, you can help assure that your project will be a success. Poor planning often ends in budget crisis - where the project winds up costing two or three times the budget. Below you will find tips on how to budget your project - so that you don't run out of funds halfway through.
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1. Estimate Costs with Precision
It almost goes without saying that in order to construct a workable budget, costs must be properly estimated. There are many ways to estimate project cost. One such method is the analogous method: looking at other, similar projects and projecting the cost based on this. Another method of cost estimation is the bottom-up method. For more information on cost estimating, read my articles: "Project Planning as a Basis for Cost Estimating" and "A Summary of PMBOK Practices - Cost Management."
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2. Perform a Risk Analysis
One of the biggest threats to a project budget is unexpected risk. One way to avoid surprises, and ensure that you have the needed funds in the event that things should go awry, is to perform a thorough risk analysis during the project planning phase. A risk analysis involves identifying potential risks, prioritizing those risks, and coming up with a risk management plan. Many articles have been written on this process, including Joe Taylor Jr.'s informative series, "Risk Management."
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3. Don't Forget Supply and Technology Costs
When you become involved with estimating project costs and the risk analysis, it is easy to forget items like paper, toner, software, and even sometimes transportation or rental fees. Double check your numbers to ensure that all project related costs have been accounted for.
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4. Make Sure You've Consulted the Important People
When compiling a budget for your project, make sure it is a collaborative process. Just when you think you have an adequate budget drawn up, you might find that Joe, the project lead, has additional costs. As with any project management task, when you use collaboration, you benefit from others who have experience and knowledge outside of your own. By consulting others, you can help create a more accurate budget.
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5. Put it All Together
Once you've obtained all of the data necessary, you can synthesize it. Make sure to take a percentage of the total estimated cost and add it onto your estimate, for that inevitable unidentified risk. Once you have constructed your project budget, you have completed a major project planning task. For more information on constructing budgets during the project planning phase, read "Project 2007: How to Create a Budget and Apply it to a Project Plan."