Overview
Preparing a budget is an integral part of establishing the business case for a project. An evaluation of the financial requirements is central to establishing whether the project is viable or not. In cases where external funding is being applied for, the budget will form an important element of the bid and the Benefits Model. At the most fundamental level, budgeting should answer the questions, What is the cost of undertaking this project? Is any external funding sufficient to cover the costs? Where there is competition for resources, is this project a priority? To what degree do cost and benefit balance up?
As with any forecast or plan, the budget is likely to change as activities unfold. It is therefore useful to undertake a sensitivity analysis to look to what likely impact any change in costs and income may have on the overall budget and assess whether the project is high or low risk in financial terms. This will normally be covered during the risk assessment/risk management process and will inform the broader cost-benefit analysis for the project.
Cost estimation and control is vital to a project’s success. For this reason a major part of any project is the cost management plan. It can be found within, inside, or be presented as part of a project management plan. A Cost Management Plan is a document which will outline the criteria and activities which must be carried out as part of project management. A Cost Management Plan provides both input cost estimates, the amount of money being spent, and cost output estimates, which is the amount of money estimated to be received. It will provide the planning and structure necessary to control the costs of the project, keeping them within the limits of your budget. The exact nature of a Cost management Plan may very greatly.The exact nature of the cost management plan is dependent on the interests and needs of the project stakeholders.
The idea of managing a project can seem like a daunting task, however, provided with the right tools, any project can achieve success. When undertaking any type of project management, there must be a working set of guidelines and objectives that must be followed, in order to guarantee success for that particular project. An essential element when entering into any type of project management is cost budgeting. To create an effective cost budgeting plan, a total budget for the entire project must first be established. To achieve this, each area of the project must be analyzed and given a particular cost estimate. Once that is done, the total sum of cost assessments, whether those costs are in individual projects or in work packages, are combined to establish a certain parameter to provide a working guideline for the budget.