Budget management is listed as one of the top skills that all good project managers should have.
While project managers will have the support of their accounting team it is important that they understand the basics of budget management.
STEP 1 - First you need to create an estimate The estimate should include your fees as well as the supplier cost + mark-up. (Of course the mark-up should not be shown separately on the client version
STEP 2 - Once the client agrees to the estimate create a statement of work (SOW) which should include the following
Deliverables and due date - What service are you providing and when by?
Assumptions - What is and isn’t included in the service?
Work requirements - Resources needed to complete the project, such as specific approaches or tools.
Governance - Who is responsible for the project?
Project process - Detailed information on how and where the project will be completed and the specific tasks and phases that will happen
Period of performance - Project milestones including the approximate amount of time for each milestone, start and end dates, and a timeline of when the project will be delivered
Budget - What will it cost and who is responsible for additional costs?
Invoicing schedule - When will you invoice the client for the work and what are your credit terms
Expected Outcomes - Criteria used to determine whether deliverables are acceptable
Specific terms, conditions and requirements
Signatures of both parties
STEP 3 - Once the SOW has been signed, the client should send you a purchase order (PO). Ideally it is best not to begin work before receiving a signed SOW and PO
STEP 4 - Update your finance team on how much revenue you are expecting from this project and when you expect to carry out the work
STEP 5 - Create and send out POs to the project suppliers
STEP 6 - Send the client an invoice and ensure they pay on time
STEP 7 - Once the work starts keep an eye on the time allocated to the project and the actual costs that are allocated to the project
If your team needs to spend more hours working on the project than initially agreed, then you need to figure out why and whether it can be charged on to the client
Likewise if a supplier cost comes in over the agreed amount then you need to figure out why and whether it can be charged on to the client
Keep an eye on whether milestones are being met
STEP 8 - Once the project is completed compare both the service provided and the actual fees & costs, against the SOW and the estimate. Update your finance team on the actual project revenue and any changes to the timeframe the work was carried out
We offer budget management training for project managers, find out how we can help you by contacting email@example.com
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