When it comes to your company’s finances, budgets are your guiding star. And no matter how stable your company, or what industry you do business, unplanned spending typically doesn’t go over too well with the C-suite. To them, it signals that you haven’t adequately considered the intricacies of your company’s business. And while it’s impossible to completely avoid the unexpected, there are a few steps you can take to make sure that your actual spend comes in pretty close to what you’ve projected.
Use similar projects as a baseline.
Looking back at actuals for previous projects your company has completed and using those numbers to develop current budgets is a great starting point. But don’t forget to consider details that are unique to your new project. Rising materials cost, swapping out vendors or including different stakeholders can all drastically increase the cost of a seemingly identical project.
Involve your team.
You may be responsible for creating the budget, but you shouldn’t do it alone. Talk to your team. They’re the people who will actually be completing the work, so they’ll likely be able to give you the biggest insight into actual cost. And the more involved they are, the harder they will work to deliver within the constraints of the budget.
Share with everyone.
Once you have your budget in place, run it by your team. Of course, you’ll want to redact any sensitive information that directly pertains to them, like salary, for instance. But what you’re mainly after is a simple gut check. Are the numbers making sense to the people responsible for completing the work?
Keep an eye on it.
Without constant oversight, a budget can quickly get out of hand, and before you know it, a small overage has ballooned into a major budget overrun. Your chances of keeping a project on track are much better if you frequently check in on the budget versus forecasting once and forgetting about it.
Hold everyone accountable.
Just as you turned to your team for their input in creating the budget, it’s important that they’re also looped in to your budget reviews, as well. If they’re aware of where the budget stands as the project progresses, they’ll feel empowered to come up with ways that they can contribute to staying on track.
Prepare for the unexpected.
You’ve done your due diligence, but ultimately, there will always be something that slips under your radar. Make sure that even the unexpected is covered with an “issues” line item that accounts for 5-15% of your overall budget. And should everything go smoothly, you’ll come in under budget with a little cushion to spare.