How to Anticipate Future Budget Challenges to Your Project | Video

Why is this an issue? Why do you need to anticipate future budget challenges? Because shift happens! Things change or go wrong.

And if You don’t Anticipate Budget Challenges, Your Responses will Always be Reactive.

But, as a project manager, your job is to be in control – and that means anticipating events and acting before you lose that control.

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If you don’t anticipate budget challenges, your responses will always be reactive.

But, as a project manager, your job is to be in control – and that means anticipating events and acting before you lose that control.

Horizon Scanning

So, you need constant horizon scanning – like a meerkat.

So, what are you looking for, how can you spot it, and how can you respond?

First, what are you looking for?

Here are some of the major causes of budget challenges:

• Changes to requirements
• New stakeholders emerging (or stakeholders you had not been aware of or had failed to engage with)
• Changes to prices due to:
  • Inflation
  • Exchange rates
  • Borrowing rates
• New risks identified
• Issues, accidents, errors, or failures, requiring re-work or remediation
• Errors on estimation when you created the budget

Second, how can you spot the budget challenges emerging?

Monitor leading indicators:

• Expenditure vs plan
• Earned Value
• Formal risk register reviews
• Monitor quality of deliverables
• Keep an eye on the pattern of change requests
• Monitor the performance of team members, contractors, consultants, suppliers
• Keeping your ear to the ground: listening to stakeholders and taking the mood
• Speaking with team members and hearing their concerns
• Tracking costs of raw materials and forex shifts

Third, how can you respond to budget challenges?

This all comes down to the four constraints of time, cost, quality, and scope. As a result, you can:

• Secure extra budget
• Adjust your project schedule
• Compromise on quality
• Reduce your scope

Or, of course, you can re-engineer the whole project process or deliverable set. Do take a look at our video on Value Engineering.

However, be aware that this may also have an impact on the benefits profile and value delivery for your project. So, you would need to revisit your Business Case or Project Proposal.

Recommended Videos

Carefully curated video recommendations for you, related to project budget challenges:

• How to Estimate Project Costs: A Method for Cost Estimation
• How to Deliver Effective Project Cost Management
• Project Financial Management – 5 Tips for Good Project Cost Control
• Pressure to Reduce Your Project Budget
• What is Sunk Cost? …and the Sunk Cost Fallacy?

What Kit does a Project Manager Need?

I asked Project Managers in a couple of forums what material things you need to have, to do your job as a Project Manager. They responded magnificently. I compiled their answers into a Kit list. I added my own. 

Check out the Kit a Project Manager needs

Note that the links are affiliated.

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For more of our videos in themed collections, join our Free Academy of Project Management.