A project budget has to include all projected expenses for a project whether they are land costs, salaries, overhead, equipment costs, costs of subcontracting, taxes or other direct and indirect costs.
Budgets also must comply with the owner's requirements. Factors that affect finances, include resources and timeliness. Utilizing a particular technology may influence budget preparation. Those factors will influence the different ways to prepare a project budget and the emphasis that each area must receive.
Budgets may be prepared by top management of a project team and imposed on the lower layers of the organization. Such budgets will generally stress performance goals and expectations of the management with regard to time, equipment and resources that the project has been allotted. While such budgets can serve as guidelines, they rarely address the actual needs on the ground and the realities that every project team has to face.
On the other hand a bottom-up budget prepared by project team members actually involved in the project will be more realistic. This kind of budgeting increases employee morale and gets them completely involved in the project--and committed to staying within budget. The disadvantage of this method is that team members rarely see the overall needs of the organization and may also have insufficient knowledge of certain enhancement or expansion plans that are down the road.
Project budgets can also be made separately for planned resources whether they are for manpower or equipment. These resources have to follow the overall budget and the resources that have been allocated there during the financial projections. Such budgets are better made by project team members directly concerned with the execution of the project.
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