What Does a Project Budget Include?
- Labor costs
Labor costs include team member payroll, benefits, insurance, taxes, and project overheads such as administrative costs.
- Material costs
Material costs can include services or goods, supplies, and the equipment necessary for the project that is often procured at an external location such as plumbing stores, construction stores, etc. A project’s material costs vary from project to project.
For both categories, the costs can later be divided into the following subcategories:
- Fixed costs – Costs that are set for the project in advance and don’t change until the project is completed.
- Variable costs – costs that change based on extra project activities, like hiring third-party subcontractors, hiring external help (e.g., consultants), etc.
Benefits of Project Budgeting
There are far more benefits to establishing a project budget than knowing how much a project will cost. Here are some of them:
- A project budget allows managers to determine the resources allocated to each project-related task.
- The project budget helps with task prioritization in cases when the initial allocation of funds or budget isn’t enough to cover the project costs. Managers use the project budget to prioritize tasks that require urgent completion.
- Managers use the project budget as a management tool to determine whether the project tasks are on the right track towards completion.
- Managers and freelancers use project budgeting to plan for future projects using the data of past project budgets.
Using Software for Project Budgeting
Nowadays, managers have special tools, such as budgeting software or project management software, that allow them to streamline the process of creating and maintaining project budgets.
Pros of Project Budgeting Software
Ease of Use
A project budget software is simple to implement in a company as most of them offer an intuitive user interface that caters to more tech-illiterate and/or senior employees too. A high-end project management software often has additional project management features like encrypted data, customizable client or project reports, time tracking capabilities, and more.
Staying on Budget
The project budget software automates most of the business processes and, in turn, provides companies with a detailed overview of their project budget in real-time, so they can simply and accurately track their work costs.
With the software, managers can divide projects into smaller milestones to keep a close eye on project development and make changes if needed.
Easy Access for Documentation
The project budget software contains accurate data about each project-related expenditure that managers can access and review at all times. If a project-related task requires a subcontractor (e.g., a translator or copywriter), the manager can access the budget and see whether they can afford the expenditure.
Predictions and Forecasts
High-tier project budget software can be used to make project predictions and send alerts. When a project approaches a budget threshold or misses a deadline, a high-end software can warn the team of the potential risks or remind them about due dates.
Cons of Project Budgetig Software
A quality project budget software typically comes at a hefty price, and some companies might have to invest in multiple project budget tools as they offer different types of services. Moreover, this type of budget software is complicated to use. It has advanced budgeting parameters and live-data analysis features, so the company would have to invest in training sessions for its employees in order for them to use the software.
When a company uses budgeting software for all projects, employees and managers tend to become too reliant on the software and might forget to address project-related tasks until they receive a notification from the interface. Project budget software can negatively ease the work pressure in the workplace, resulting in procrastination and disengagement.