To differentiate yourself from your competitors, resource management is essential in project management : by optimizing their use, you will do better with the same resources!
And the provisional budget is an important asset in resource management: it allows you to have detailed visibility on all the income and expenses of your project. Thanks to it, you can anticipate the obstacles you may encounter and set a course for your project! Of course, the budget is an integral part of the project sheet.
Find out here best practices for preparing the provisional budget for your future project - you don't need to be a chartered accountant or a banker to do it!
Making a provisional budget is essential when you want to create a project: while it can be used to convince managers or investors of the interest in financing your project, it will in any case allow all the parties involved in the project to have visibility on its entire implementation.
The estimated budget for a project, if realistic, describes as precisely as possible the expenses and revenues that will be associated with your project. One of the tips is to base yourself on similar projects carried out by other companies by doing market research, so that your forecasts stick as much as possible to future expenses and revenues.
Of course, if this is not the first year that you have carried out this type of project, you can use your figures from previous years to develop your budget.
The primary interest of a Provisional budget is to try to increase your visibility on the future of your project - or in other words, to anticipate!
Indeed, building the provisional budget for your project is one of the best solutions for estimating its feasibility. You will be able to calculate the margin you hope to reach (or at least the balanced budget) and make adjustments to your strategy if you realize that your business plan or financing plan does not hold up.
Another tip: you can even make several forecast budgets that represent the different scenarios you are considering, and that take into account the unexpected events that you can imagine (supply problem, new competitors who are changing the market...)
Your estimated budget will be a powerful decision-making tool as the project is carried out. Indeed, your budget allows you to check every month that you are not straying too far from your initial strategy and that the decisions you have made have had the impact you had planned.
The provisional budget is therefore a very effective project monitoring tool to check that you are sticking to what you planned: it is a guide that indicates the course you planned to take!
The estimated project budget can also be an interesting lever for managing your teams. On the one hand, it can be used to show your teams that your resources are not unlimited, or that they have spent more than originally planned, in order to convince them to pay attention.
Conversely, drawing up an ambitious provisional budget will have a significant engaging effect on your teams. They will feel galvanized to take part in a project with so many resources, which will increase their motivation.
The estimated budget is therefore a powerful argument to support your decisions with your teams.
An essential prerequisite: to create a provisional budget, you must identify all the resources at your disposal. We are talking here about material and human resources, but also about the time (number of days) you have to carry out this project successfully.
For long-term projects, it is best to calculate your budget by breaking it down monthly. There are several reasons for this.
First of all, it will often be easier to forecast your monthly rather than annual expenses: the margins of error will be reduced!
Second, monthly budgeting will provide better ability to anticipate: if you force yourself to budget each month, you will then need to be more specific about how long you plan to do each task.
In addition, monthly payments don't take anything away from you. We don't teach you anything if we remind you that to establish your annual budget, all you have to do is add up the budget for each of your 12 months.
If you want to effectively forecast your expenses and revenues, it is essential to involve the people who are primarily affected by them: your employees. It will be much easier to manage to anticipate the right amounts by calculating them with those who will work on the project on a daily basis.
Each of your employees will be able to give you a precise idea of the importance of expenses and revenues related to the tasks for which they are responsible.
You risk obtaining a provisional budget that is much closer to reality by asking your employees about their areas of predilection, than by entrusting the entire budget to a consultant.
In addition, you will get an even greater commitment from your teams if you have involved them from the design of the project budget.
There is no point in inflating your expenses. Don't overestimate them, it's not a good idea. You can keep a very slight margin of safety if you are worried about exceeding the amounts you have planned, or if the amounts are really hard to predict.
On the other hand, it is strongly recommended to set aside a reserve on your cash flow plan in order to be able to deal with the unexpected.
In the same way, avoid undervaluing your expenses. Quantifying a budget that is too small for the tasks you have to do will require a prioritization between the various tasks you had planned, which will inevitably be a source of tension in your teams.
Underestimating your deadlines will mean making your teams work longer than planned - and therefore exploding the projected project budget.
Numerous studies have shown that it is common to be overly optimistic when estimating how long it will take to complete a task. Thus, ask your employees about the time they think they need to complete their missions, and add a safety margin as a precaution (often between 20 and 30% depending on the employee).
If, in order to make it up front, you are forced to try to predict the real, there will come a time when your hypotheses will be verified or invalidated. When during your project, you get more information on the expenses and revenues you will face, use it to rework your provisional budget!
Therefore, it is advisable to review your actual expenses and revenues every month, and compare them to your forecasts. Important: when correcting your estimated budget during the year, remember to keep the previous version - this will avoid losing track, but will also be very interesting to review when you have made good progress with the project.
To go further, Discover how to build a project budget without missing out.
Is the development of the provisional budget for your project complete? You can now integrate it into your project sheet.
