Determining the Project Budget

In this chapter

• Understand why the project budget is important to project success
• Review the process for figuring a realistic budget
• Learn the key project budgeting principles
• Understand the common mistakes people make when building a project budget

It's one of the key success factors for projectscompleting the project within budget. Yet, for many project managers, especially those managing internal projects, it's the success factor they have the least awareness about. There are several reasons why this occurs, and it does vary by industry, but most of the reasons have to do with organizational management structures and organizational budgeting and cost controlling policies.

For our purposes, in this age of increased accountability of project investment decisions, we will assume you need to establish a project budget and will need to track costs to it as the project is executed.

Since this an introductory project management book, we will avoid any discussion of advanced financial topics and instead will put our focus on the "need to know" fundamentals for figuring your project budget. In this chapter, we will emphasize the importance of the project budget, review the process and key principles for developing a realistic budget, and highlight the areas where people often go astray. This will lead to a budget that has credibility with your stakeholders and that provides you with the foundation to effectively track project costs and manage project execution.