Budget tracking is a crucial area of project management and includes making budget estimations, measuring results, updating forecasts, and communicating all these things to the people assigned to the project. Project budget tracking is an ongoing process that starts at the beginning of a project and continues until its completion.
Budget Tracking Vs. Expense Tracking
Budget tracking is not to be confused with expense tracking. Expense tracking is the process of tracking all outgoing project expenses or simply a way to keep track of how much money has been spent during a particular project.
Budget tracking, on the other hand, is tied to the project budget and monitors the money that has been spent from that budget so as to prevent the team from exceeding the budget’s threshold.
Why Is Budget Tracking Important?
Managers use budget tracking to coordinate the project’s costs, manage potential risks, and ensure the budget is being spent at a healthy rate, in line with the project's progress.
Managers who fail to track their costs accurately risk overspending or running out of money midway through a project. With frequent budget tracking, managers keep their teams on track, update the owners or stakeholders with budget reports and milestones, and calculate the profitability of each project stage.
Manual Vs. Automatic Budget Tracking
There are two ways to go when it comes to budget tracking - manual or automatic.
Manual Budget Tracking
Manual budget tracking is the standard approach for staying on top of budgets, where managers use spreadsheet tools like Excel or a pre-built budget tracking template to track budgets. Managers can manually track budgets by entering data row by row or importing data from their project management software.
Manual budget tracking is susceptible to human error, which can lead to inaccurate budget tracking and may result in the project running out of money before completion. Moreover, manual budgeting can become a meticulous process as it requires a great amount of precision and patience.
Managers can choose to use pre-made templates in spreadsheet software like Excel or other types of templates. Still, they often require a lot of customization and tinkering with the formulas to accurately display how the team operates during a project’s lifecycle. Generally, manual budget tracking is the cheaper option but requires more time and precision.
Automated Budget Tracking
Automated budget tracking is a high-tech solution for managing budgets as it allows managers to “outsource” this meticulous task to an automated time tracking software.
This method eliminates a big part of the need for manual input and significantly reduces the human error factor, as managers only need to assign a budget to a project and the software is able to automatically update the budget as the team updates their work logs.
Regarding software options, there are plenty of different providers out there, offering a variety of features at different price points. Not every company can afford to pay for high-end project management software, nor do they need to; as most of the more robust options sport a wide range of complex features that might force a company to invest further in employee training.
When hunting for a budget tracking or time tracking software, managers typically search for software that has the following standard features:
- Dashboards – useful for breaking down project data.
- Tagging – which allows filtering budget consumption from individual tasks or employees.
Notifications – which display real-time budget information, such as budget milestones and off-budget expenses, and keep managers informed about the state of the budget.