How to set, and keep, long-term projects’ budgets
Four tips that can help a business avoid the pitfalls of overspending
As a company owner, you are likely constantly planning new projects to pursue. For long-term projects, you might have to select which staff members will work on them, purchase software and other items needed, construct a time frame outlining milestones to hit by certain dates, and the list goes on. These projects have many elements to consider, but there is one major step you absolutely have to take before anything else: setting a strict project budget to adhere to.
In my own experience as the CEO and founder of CMA Exam Academy (a Certified Management Accountant exam review program), I have seen firsthand how important it is for businesses to prepare budgets for long-term projects. Here is an overview of why long-term project budgets are pivotal and helpful tips for business owners to keep in mind.
Improving the bottom line should always be a top priority for business owners. If you don’t have a project budget, it can be so easy to have a “the sky’s the limit” mindset and spend an outrageous amount of money that can end up hurting your business’s bottom line and financial health in the long run. Having a strict budget will help you and your team decide what costs are absolutely needed to make the project a success, which will keep you all from spending frivolously.
On top of this, having a project budget can also help you and your team adhere to a designated timeline. For example, if your business needs to send items that will be used to manufacture a new product line before a specific deadline, you know you will need to ship the items well before the date, so that you don’t end up spending a ton of money on overnight shipping (which can cause the whole project to go way over budget).
If you are looking to set a budget for a new project, make sure to keep these helpful tips in mind:
Have a meeting for project decisionmakers to discuss the budget
Will the marketing department, customer service department and accounting department all be involved in this project? One department’s team lead may have a different idea of what the project’s total costs will be than another team lead. For example, a social media team lead may know that the price of a Facebook advertising campaign is way higher than what another department head thinks it would be. That said, having a meeting for all of the project’s decision-makers will give everyone the chance to share their thoughts and come to an agreement on which budget to select.
Use a cloud-based spreadsheet platform to list out essential expenses
Trust me, it is so easy to forget about minor project costs that can add up and cause you to go way over the total amount you thought the project would cost. For example, if you are expanding services into a new city or country, you may forget to include the price of a localized Google ad campaign targeting potential customers in the new market. That is why it is vital to spend time thinking of every single cost involved in the project and recording them in a spreadsheet. These may also include the hourly costs for local contractors who will help, software subscriptions, printed documents, flights for team members, etc.
You may be thinking that you could just make a mental list of all of the expenses and then select a general spending threshold to not go over, but it can be so easy to forget smaller costs (like the cost of a packing or shipping supply you need). Taking the time to list out every essential expense will help you select the best project budget possible.
Now, it will be wise to use a cloud-based spreadsheet platform (like Google Sheets) to list out the expenses, rather than a plain Word Document or Excel spreadsheet. The reason for this is that if you ever need to add on a new project expense or remove one, you can easily do that on your phone while on the go. Or, if you and your team spend more on some costs, you can easily adjust the budget for the rest of the project on your phone. Your team will also be able to access the spreadsheet whenever they need to as well.
Ensure everyone working on the project is well aware of the budget
The last thing you would want is for a team member to accidentally and unknowingly overspend on ordering supplies or another project element just because they didn’t know there was a strict budget in place. So make sure all of your team members working on the project are well aware of the budget that is in place. If one person doesn’t know the budget, they can end up making a decision that causes the whole project to go way over budget. Make sure everyone has access to the aforementioned cloud-based spreadsheet, so they can always stay in the loop about total costs up to a certain point, how much of the budget is still available, etc.
Have regular meetings specifically to review the budget
You don’t want to just set the budget and then hope all of the project’s decision-makers abide by it. Especially for projects that will take months, a year or even more to complete, it can be easy for unforeseen costs and/or roadblocks to pop up that could cause you to go way over budget. So set a weekly or bi-weekly meeting for the project’s decision-makers to go over the budget, share updates on where their teams are at, check to make sure milestones are being hit on certain dates, etc. This will keep the project on track to be completed by a designated deadline, all while keeping it under budget.
Setting and adhering to a budget will help prevent long-term projects from hurting a business’s overall financial standing. Following these steps will help set you and your business up for budgeting success.
Nathan Liao, founder of CMA Exam Academy, mentors accounting and finance professionals in over 80 countries to earn their Certified Management Accountant certification.