Project budgeting is the process of allocating or assigning a cost for a particular project. This cost includes all expenses need to run the project like new equipment purchase, employee costs, average delay costs, operating cost etc.
Do you know why this project budgeting carries utmost importance for a business?
Let’s find out….
Project budgeting needed to let shareholders or investors know beforehand how much money needed to accomplish upcoming requirements. Its the first & foremost benefit of project budgeting. It also used to reduce the cost of projects while increasing profit.
The next benefit would be curbing project cost. Budgeting report shows how much money spent on which activity and whether this expenses avoidable or not. It helps project manager or the decision maker to diminish project expenses.
Now let’s find out which are the most appropriate ways to do a realistic and profitable project budgeting.
“Beware of little expenses; a small leak will sink a great ship”.
Here are some ways to do a perfect project budgeting:
1- Make a list
Before planning a budget for an individual project first list out all possible expenses in a month. This will help to understand which are most needed expenses and which expenses can avoid at the end of a month. It helps to control project expenses also helps to find out funding resources to accomplish these expenses without facing any financial issues.
2- Identify prime costs
What is prime cost??
Prime cost is termed as direct cost incurred during product manufacturing and in the project, it’s the direct cost to a project. Prime costs help a project manager to find out & charge a profitable price for a project. It also helps to decrease the project cost and increase profit to beat competitors.
So, after making a list all expenses find out prime costs in a project with strategies to decrease these expenses for business benefit.
3- Compare past projects
This process or step helps a project manager to find out which past project generate more profit. Past project analysis serves as a method for a better project pricing. Find out the most profitable project and analyze it to find out the expenses and pricing to charge a better pricing for a recent project.
4- Budget Spreadsheet
What’s the need for a budget spreadsheet? It’s not easy to remember all expenses or costs allocated to a project. The best way to keep all expenses in front of an eye for budget analysis would be the creation of a spreadsheet. Noted down all assigned expenses with costs and after a month analyze the cost incurred with profit generated and find out how to reduce these costs with generating more profit.
5- Make Budget flexible
As we know future is unseen. But we can always be ready to face all upcoming and unseen business hurdles. For a startup, it’s the most needed step to include in project budgeting. Never make your project budget a fixed one. At the time budgeting keep some funds available for other unseen expenses like employee salary hike, project delay costs etc. This helps for a smooth business running.
6- Monitor Expenses
Lastly, monitor all expenses incurred in a month to know where the money goes. To monitor expense a budget spreadsheet is a must. Do budget spreadsheet and track money movement and make a realistic and achievable strategy to increase profit percentage as profit is the ultimate aim of every business.
Project Budgeting is the best & only way for a project based company to analyze how much profit it can generate from which project and from which type of project cost.
So as you got the tips
Now how to do this project budgeting and what’s the best tool to do it?
ProfitBoard is the best tool for project budgeting and project pricing. Its a product of SlickAccount. Using profit board a business owner would be able to know which pricing would be better for a project.
Read more cash flow, budgeting, project pricing & more articles here: https://blog.slickaccount.com/category/cashflow-management/
Know how to grow your startup: https://blog.slickaccount.com/category/start-up/business-growth-tips/