Project budget management: The importance of business management?

Posted on Jan 31, 2023 at 10:01 PM

Good planning is the secret behind the success or failure of any small or large business. Therefore, project budget management and planning are one of the main elements of the planning process, collecting the company's financial data, expectations, and labour market analysis and taking into account the strategic plans, all of which are required to manage the project budget optimally.

But follow with us how the project budget management process is done and why this is what we will recognise in the following article.

Why is project budget management important in business management?

The budget is generally defined as a set of dynamic financial plans from collecting data, analysing and researching behind fine details, and making pioneering decisions regarding the allocation of funds. These plans are used to anticipate project or company revenue and expenditure expected later, usually monthly, quarterly or annually.

These plans should be flexible and dynamic so that they can be adjusted if anything changes in the business plan or market environment, despite significant challenges in preparing a reasonable budget that will improve the company or project; by following the project management phases properly, an outcome worthy of effort can be reached.

The following reasons illustrate the importance of budgeting in business:

• Ensuring the availability of resources:

The essence of the budget is to ensure that resources are available in the company or project so that they are sufficient to meet its objectives. Proactive financial planning serves to identify those that require the disbursement of more resources and those that need their reduction.

For example, if a team needs a new staff member to expand the business, advance budgetary planning allows it to be recruited against other expenditure reductions.

• Identifying and reporting on internal objectives:

Managing the project budget makes it possible to determine the revenue needed to reach the targets. The funding can be used to determine the financial objectives compatible with the level of the company and the team. These objectives must be achievable to reach an acceptable result against expenditure.

For example, if a company aims to reach 10,000 new users in a year but has achieved only 4,000 users, here you should think, what's wrong? What should we do? Do we redistribute expenses otherwise? Do we pay more for resources to progress?

By planning well to manage the project budget and determining the next step, answers can be obtained to those questions.

• Prioritisation of the project:

A secondary aspect of project budget management is the identification of priorities and initiatives in the project. When identified, an idea can be taken of the potential return on investment in the project and how these priorities correspond to the company's values and the extent to which the company's overall financial objectives are affected.

• Increased funding opportunities:

For small and emerging companies looking for investors, preparing and managing a project budget help attract investors. The existence of documented information on the project budget and its future projections indicates the company's interest in its financial situation and evolution.

• A pivotal plan:

Budgeting is like a road map if it goes as planned. This means knowing the expenses, disbursements, and acquisitions, but as is known, things can be predicted in the business world. Some external events and circumstances can directly affect the company's revenues and change its priorities by a moment.

As the closest example, what happened in 2020 when the coronavirus epidemic spread around the world, the economic impact reversed was as large as ever expected, and forced corporate executives to reformulate their budgets to limit huge losses quickly.

But by managing the project budget, flexible thinking can be maintained to reorient plans and help lead the company through the most challenging times.

What are the steps for preparing the project's budget?

By following the following steps, a reasonable budget can be prepared for project development and progress:

• Identification of the project's area of work:

Initially, all expenditures must be allocated to clarify the project's area of operation, timetables, and delivery dates, the optimal way through the preparation of the project's division of labour (WBS) structure, which allows for the detailing of all project delivery and facilitates the acquisition of assessments and allocation of resources for budgeting.

• Identification of resources:

The second step is determining the resources required to complete the project. The following factors must be taken into account when determining the size of these resources:

• Recruitment: The most expensive factor but the force factor, the number of staff required to perform the work and, if necessary, the number of additional staff.
  
• Equipment: The type and number of equipment vary according to the project's requirements, maybe machinery, hardware, heavy equipment, or software and software.
  
• Sales & Marketing: Depending on its nature, the project may need or not need marketing; it should be considered if required.
  
• Training: In some cases, the project requires training of teams, and members on something new added to the project.

In addition to previous factors, the project may require additional costs, such as travel and cooperation with other companies, that must be considered.

• Allocation of amounts:

Once all of the above has been sorted, the allocation of funds to each resource required by the project must begin, and records must be in place to rely on them. It is advised to consider other similar project budgets and use their costs as a guide.

• Budget preparation:

Once costs are allocated to each resource, you can formulate the closest budget estimates within spreadsheets or through dedicated project management programs, take into account contingency expenses, also formulate budget schedules.

It is advised that budget estimates be shared and reviewed with other members of the Panel to obtain their feedback and determine how long they take to complete their assignments. This feedback helps to pay attention to certain omissions or errors.

• Obtaining and implementing final approval:

It is recommended that a linguistic audit of the budget be conducted before it is sent to the decision-makers with justifications for all the estimates mentioned upon obtaining approval that can be initiated. Implementation should be strictly monitored during the first period so that the expenditure does not exceed the prescribed quantities and that the team members achieve the objectives within the specified time.

To better manage the project budget, it is advised to see similar budgets and consult relevant experts, carefully review all budget lines, ensure that all costs and activities implemented align with the funding, and constantly update them to market requirements.

You can also benefit from the project management training courses in Dubai that we are pleased to offer at the London Premier Training Centre to allow you to expand your management field.