Chapter 7 – Scheduling Resources and Budgets

7.13. Creating a Project Budget

A simple budget can be created in 5 steps:

  1. Break the project into small tasks and milestones: Create a task list. This will help the team understand all the details of what needs to be accomplished. Example: Trainer Fees at $2500.00 does not tell the person in authority any details. Trainer Fees: 5 trainers x $50.00/each per hour = $250.00 per hour for 5 trainers. 10 hours of training x $250 per hour = $2500.00 is an example of a good project breakdown of costs.
  2. Estimate each task and milestone: Research comparable costs and give each task/milestone an estimation. This is a good time to identify all the resources (people, materials, equipment) work performed, and work out the costs.
  3. Add the estimates all together: Calculate the total costs by either adding them up. If you use an excel sheet, you can sum to get the total.
  4. Add in any contingencies, taxes, other costs: This can include overhead costs, reserve funds, and governmental taxes.
  5. Seek approval:  Speak to the person of authority, review the project budget in detail, and get approval with a signature.

You can use a checklist to ensure you have covered all the budget expenses before seeking approval:

    1. Can I define the project and its end goal?
    2. Are there any ground rules, constraints, and assumptions I should consider?
    3. Do I have sources of data (Task List, WBS, Cost Estimates, Schedule) to rely on?
    4. Is the estimating methodology in use acceptable?
    5. Do I know who is going to work on the project?
    6. Do I have a list of resources and their rates to complete the project?
    7. Can I compare my estimate against the best practices industry standard?
    8. Do I have contingency reserves to account for risk?
    9. Who are the key project team members to help me in the estimating/budgeting process?
    10. Am I on the same page with Project Stakeholders?
    11. Can I compare the budget with the original estimates and reconcile the differences?

(Viter, 2021)

Watch the video: How to Create  a Project Budget by Project Manager [3:05] below. Transcript available on YouTube.