Determine budget, is a project management process in which the cost baseline is created by combining the activity-based estimates put forward using various methods in the cost estimation process.
These methods for cost estimating are;
- Analogous estimating
- Three-point estimating
- Parametric Estimating
- Bottom-up Estimating
Thanks to this process we can have the cost baseline which we will use during the project's life in order to monitor and control the performance of the project in terms of cost by using measurement methods. By using the control accounts we bring the activity cost estimates together in order to form an approved budget.
When preparing the project budget, we always think about the cost aspect of the project, and it should be so. But it should be noted that the project budget also provides information about the time dimension of the project. Thanks to the budget, we can better see the monetary needs of different periods.
When preparing the project budget, we always think about the cost aspect of the project, and it should be so. But it should be noted that the project budget also provides information about the time dimension of the project. Thanks to the budget, we can better see the monetary needs of different periods.
When budgeting for the project, we always think about the cost aspect of the project, and that is as it should be. But it should also be noted that the project budget also provides information about the time dimension of the project. Thanks to the budget, we can better see the monetary needs of different time periods.
Along with the project team and project manager, also senior management and project sponsor may see the funding requirements better by using a well-prepared budget.
Project budget is almost always a constraint for the project manager. The project manager must always consider the project budget when addressing the scope of the project, Organizing time-related issues, and meeting the needs of stakeholders.
While preparing a project budget we need to take aggregation of costs of work packages defined in the WBS. The project manager determines a contingency reserve here, by documenting risk responses depending on the nature of the risks and ambiguity of the project. After linking the money requirements with the schedule of the project. After completing them, we can baseline the costs of the project. Senior management is responsible to determine a management reserve in order to deal with unforeseeable risks. By simply adding management reserves over the cost baseline, we create the project budget.
Project budget is almost always a constraint for the project manager. The project manager must always consider the project budget when addressing the scope of the project, Organizing time-related issues, and meeting the needs of stakeholders.
While preparing a project budget we need to take aggregation of costs of work packages defined in the WBS. The project manager determines a contingency reserve here, by documenting risk responses depending on the nature of the risks and ambiguity of the project. After linking the money requirements with the schedule of the project. After completing them, we can baseline the costs of the project. Senior management is responsible to determine a management reserve in order to deal with unforeseeable risks. By simply adding management reserves over the cost baseline, we create the project budget.
Along with the cost baseline, the other output of the process is project funding requirements that represent the total funding requirements and periodic funding requirements for the project.
Inputs to the determine budget process
- Cost estimates
- Cost management plan
- Resource management plan
- Scope baseline
- Basis of estimates
- Project schedule
- Risk register
- Business case: This is used to identify the critical success factors for the project like financial success factors.
- Benefits management plan: This document has the target benefits, such as net present value calculations, timeframe for realizing benefits, and the metrics associated with the benefits.
- Agreements
- Enterprise environmental factors: Exchange rates is an example of EEF's used in this process.
- Organizational process assets: Several OPA's can be used as an input to the determine budget process. This includes, existing cost budgeting policies of the organization regardless of formal or informal, historical information that may help in parametric or analogous estimates or include project characteristics to develop mathematical models to predict total project cost, lessons learned repository, budgeting software.
Tools & Techniques of determine budget process
- Cost aggregation: In this technique, individual cost estimates of activities are aggregated to find the cost estimate of the work packages and then the work package cost estimates are aggregated for the higher component levels of the WBS and ultimately for the entire project.
- Reserve analysis
- Historical information review
- Funding limit reconciliation: It is the action of reconciling the expenditures with the funding limits of the project.
- Financing: Especially for long-lasting projects, financing means simply acquiring the necessary funding for the project.
- Expert judgment