While most of us are fully aware of what is involved in developing budgets, the question can often be asked, where do you start with it. Most project, that are not high capital expenditure, struggle with this and it becomes a guessing game for most whereas for some, it gets overlooked in favour of a resource sheet. The reality is, that resources are budgets and budgets are resources so they are intrinsically linked. When developing a budget there are a five resource / budget planning tools or techniques to be helpful, depending upon the uncertainty and complexity of the project. These are the
- The Team List (Tool 1): – The Team List is a very simple, yet vital, project management tool. This is a list of all the project team members and appropriate contact information. This is normally the only human resource planning tool required for projects. In these cases, the Team List is used to ensure that a representative from each part of the business that is required to perform activities on the project has been identified and contacted.
The Responsibility Matrix (Tool 2): – The Responsibility Matrix (also called the Responsibility / Accountability Matrix or the Roles and Responsibility Matrix) is a table that is used to provide clarity for all of the project team members concerning their expected level of involvement on the project. The matrix is normally constructed by listing the project deliverables or activities down the vertical side of the matrix and the project team members on the horizontal side of the matrix. The project team member who is responsible for planning and ensuring that each task is executed properly is identified in the matrix. In addition, the matrix will normally identify other project team members who are involved in some fashion on the activity. The designation of the role of a project team member within the matrix can be done using several methods. The most common technique is to an acronym RACI.
The preferred approach is to designate the responsible team member with an “R.” If the activity is a cross-functional activity, indicate the other team members who must contribute to the work of the activity with a “C.” If the activity requires an approval of one or more of the other project team members I will indicate that with an “A.” Finally, indicate those team members who need to be informed that the activity has been completed with an “I.” If using RACI, be certain you know and understand the definitions that your organization uses.
The Responsibility Matrix is used primarily on projects as a tool for both communicating assignments and for risk identification with respect to the capacity and capability of project team members. If a team member is carrying a particularly heavy load, for instance if they are “Responsible” for many activities, there is a risk (Tool 3) that the team member will be over-allocated and unable to perform some of the activities according to the project plan. This matrix can put a spotlight on an individual who is being asked to accomplish activities beyond their experience or capacity. It is easier to have a discussion with the individual or their manager when we are looking at the requirements of the individual’s column on the matrix rather than implying that the individual is somehow unable or incompetent to work on the project. Furthe
r, the matrix will indicate those activities where there is no “Contributing” support for the individual who is “Responsible.” In those cases, there is a risk that if the team member on that activity is reassigned or temporarily unavailable, there is no one who can be immediately turned to on the project team to keep the activity moving along.The Project Budget (Tool 4) is the time-based spreadsheet that shows the project team’s intent to spend the resources on project activities. The spreadsheet is typically organised by listing the project activities in the spreadsheet rows, and designating each column as a time period. It is normally set up with each column representing a calendar month. The
data created in the Project Budget is transferred to the projects financial planning and management system.
All of the project activities are usually listed by some organising principle based upon the phases of the projects. The most common way of organising a budget is using project phases, WBS structure, department/business function, cost center and cost category.
Lastly, lets discuss the budget justification (Tool 5) and this generally comes in the three steps:
- Review every cost for accuracy: – A review needs to be sure that every proposed cost is correct and reasonable.
- Confirming overheads: – Request the necessary financial information on overheads and start analysing cost estimates and confirming their appropriateness to the project.
- Summarising the review: – Review the accuracy and appropriateness of both direct and indirect costs planned for the project and reports on the budget justification
Best of luck with all of you budgeting.