What is budget management?
Is budget management as simple as it sounds? Well, it depends. Technically speaking, the term refers to the processes of overseeing and controlling project expenses with the aim of sticking to a predetermined budget.
To do so, your project budget will go through several stages, including planning, forecasting, reporting and monitoring results. At each stage, individuals and departments collaborate to align goals with the company's direction and mitigate potential issues (and even financial risks).
Keep in mind that budget management is a rather dynamic process, meaning that things can change as the project evolves. The key is that everyone's on the same page, working towards the same objectives. After all, you can change your ways but never change the goal.
How to manage project budget?
We caught up with Steve Berridge, Director of the Financial Management Software Division at Access Group. Our discussion covers how project managers and finance professionals can effectively manage project budgets.
With 24+ years of experience, Steve's insights are an essential watch for any finance or project professional. In his video below, Steve provides key tips and advice on how you can start making improvements now.
1. Keep track of time and budget
Making sure you keep a log of time spent and resources used so that you can balance it against your profit margin is key. Simple control of costs and cost planning will go a long way in establishing control over operating costs and improving profit margins for your projects.
2. Make sure you are aware of committed costs
A big challenge for many project-based companies is that they often understand what the budgeted costs are and what the actual costs are, However, there is no clear visibility on what the committed costs look like or the purchase orders that have been raised.
If this is done manually and through different systems and processes it is often hard to see what the committed costs look like and can quite often be a leading cause in projects running significantly over budget and reducing profitability.
3. Have full visibility of key resources
This is a key metric for any project based company – understanding where your key resources are spending their time – particularly the time spent on chargeable activity as opposed to non chargeable activity such as internal meetings, proposal writing, and so on.
Too often many companies will recruit additional expertise, bringing in more cost to the business, without reviewing utilisation and making sure it is hitting key levels.
4. Receive automated notifications
Whether being notified that a project is about to go over budget, or a reminder that a key deadline is nearing; automated notifications can eliminate inefficiencies. Automated contracts and invoices can also save internal time and resources, this could be in the form of a notification or invoice creation if services go over contractual costs.
5. Create a single source of truth
A best practice for any project-based business should be to create a single source of truth. Whether you are looking at the finance system or your project/job system you should be seeing the same data.
At Access we provide a single solution that allows us to track time, expenses, procurement and all the key areas that finance and project managers need to keep track of - this information flows through business workflows before posting into the core finance system – so whether you are a project manager of a finance director, whichever system you are working in, the data is the same.
How Project Accounting Software Can Help
Budget management, in the end, relies on how effective is the collaborative efforts between you and your team. The company's financial management capabilities are also something to take into account.
On the bright side, project accounting software can greatly enhance this process, enabling finance professionals to monitor project expenses in real-time and make adjustments as the project evolves.
Integrate the right technology to improve your project-based finance processes and make sure your team's on the right track. Find out how our solutions can help turn your next project into a successful one.