Budgeting for Project Management

10 tactics to control costs A guide which provides you the tools for cost reduction When I was head of finance, we were facing a challenge: → How to reduce our hourly rate to stay competitive This became my number one priority to help the business And we succeeded to decrease our hourly rate by 3% while inflation was up! Today I am sharing the tactics to reduce costs: 1. Budgeting and Forecasting: • Importance: Plan and estimate costs, revenue, and expenses. This is where you can get your team to commit on cost reduction. • Focus: Use accurate data and update budgets regularly. 2. Variance Analysis: • Importance: Compare actual performance with budgets to identify deviations. If you found a variation, there is a big chance that you have a topic to explore to reduce costs. • Focus: Investigate significant variances for improved accuracy. 3. Cost Allocation: • Importance: Distribute indirect costs for accurate pricing and control. • Focus: Maintain fair and updated allocation methods. 4. Activity-Based Costing: • Importance: Assign costs to specific activities for better resource allocation. • Focus: Identify and measure cost-driving activities accurately. 5. Zero-Based Budgeting: • Importance: Justify every expense to optimize resource allocation. • Focus: Balance rigor with operational continuity. 6. Cost-Benefit Analysis: • Importance: Compare project costs with expected benefits. • Focus: Consider tangible and intangible factors. 7. Cost-Volume-Profit Analysis: • Importance: Understand how sales, costs, and pricing impact profitability. • Focus: Validate fixed and variable cost assumptions. 8. Inventory Management: • Importance: Optimize inventory levels to reduce costs. • Focus: Use EOQ and JIT techniques for efficiency. 9. Vendor Management: • Importance: Evaluate and maintain supplier relationships. • Focus: Assess performance and diversify suppliers. 10. Procurement Management: • Importance: Acquire goods at the best cost with quality. • Focus: Establish clear procurement processes and collaboration. 👉 What is your favorite method to find cost reductions?

Rolling vs Static Forecasts Static budgets are killing your ability to adapt. There, I said it. Most businesses create their annual budget in December, then spend the next 12 months pretending those assumptions still make sense when everything has changed. I see this problem everywhere. Companies clinging to outdated numbers while their actual business reality shifts completely. The alternative? Rolling forecasts. But let me break down both approaches because each has its place: 📊 STATIC BUDGETS The old school approach. You build it once at the beginning of the year based on your best guesses at that moment. Characteristics include being set annually, using assumptions from one point in time, staying hard to adjust mid year, and focusing mainly on variance reporting. The benefits are real. Clear performance benchmarks, easier long term planning, and boards love them because they provide predictable targets. The downsides hurt though. They become outdated fast, can't adapt to market changes, and create that dangerous "set it and forget it" mentality. 📈 ROLLING FORECASTS The modern approach. Dynamic planning that updates regularly, typically monthly or quarterly, by adding future periods and dropping past ones. Key features include regular updates based on current data, continuous 12 to 18 month forward visibility, and direct connection to operational drivers like sales pipelines and hiring plans. Benefits include being agile and responsive to change, improving real time decision making, and helping anticipate both risks and opportunities. Challenges include requiring more ongoing effort, being harder to coordinate across departments, and feeling less concrete to some stakeholders. 🎯 THE VERDICT Rolling forecasts win for operational management. Static budgets still have value for board governance and investor reporting, but running your business day to day requires the flexibility that only rolling forecasts provide. The hybrid approach works best. Keep a static budget for external reporting requirements, but manage internally with rolling forecasts that reflect current reality. === Budgeting shouldn't be about hitting arbitrary numbers set 12 months ago when market conditions were completely different. It should be about having accurate, current information to make smart business decisions. What's your take? Are you still stuck with static budgets or have you moved to rolling forecasts?

Glen Palmer, PSP, CFCC, FAACE and I are honored by AACE publishing another of our Top Ten series of papers in the Cost Engineering Journal. Resource management sits at the heart of project success—and, too often, at the root of costly construction claims. Why Focus on Resources? Most construction schedules are built on assumptions about production rates, durations, and quantities. But when resource planning falls short—whether due to unrealistic manpower peaks, lack of skilled labor, or poor coordination—projects risk delays, cost overruns, and disputes. Rather than waiting for claims to arise, Palmer and Carson argue for a proactive approach: plan, validate, and monitor your resources from day one. Key Takeaways from the Top Ten Approaches: 1. Validate Resources by Discipline: Go beyond surface-level schedule checks. Detailed resource validation—using field-experienced personnel—can identify unrealistic resource peaks and prevent unachievable schedules. 2. Formalize Punch and Warranty List Management: Avoid never-ending completion and warranty periods by developing comprehensive, early punch lists and using structured warranty management systems. 3. Check Resource Earning Curves: Ensure planned progress is actually achievable by comparing planned manpower curves and production rates to real-world constraints. 4. Manage Schedule Compression: When compressing schedules, understand the risks and costs of acceleration and recovery. Use structured analysis and documentation to avoid disputes. 5. Review General Conditions Labor: Monitor and budget field overhead costs carefully, and avoid relying on variable, hard-to-track level-of-effort activities. 6. Use Constructability Reviews: Always have experienced field experts review “fast-tracked” project schedules to spot resource and constructability problems early. 7. Address Trade Stacking and Overcrowding: Analyze crew concurrency and area usage to prevent inefficiencies from too many workers or trades in the same space. 8. Specify Resource Requirements in Schedules: Include resource histograms and percent curves in scheduling specifications to enable thorough schedule reviews. 9. Plan for Resource Availability: Evaluate the availability of skilled labor and specialty resources, especially on large or geographically constrained projects. 10. Minimize Inefficiencies from Disrupted Trade Work: Align procurement, sequencing, and trade starts to reduce disruption, and use targeted planning to ensure work is completed efficiently on the first attempt. Conclusion: Resource-related claims are often avoidable with disciplined planning, honest schedule validation, and ongoing monitoring. By following these ten approaches, project teams can dramatically reduce the risk of disputes, keep projects on track, and protect both profit and reputation.

𝗛𝗲𝗿𝗲’𝘀 𝘄𝗵𝘆 𝘆𝗼𝘂𝗿 𝗯𝘂𝗱𝗴𝗲𝘁 𝗽𝗹𝗮𝗻𝗻𝗶𝗻𝗴 𝗺𝗶𝗴𝗵𝘁 𝘀𝗹𝗼𝘄 𝗱𝗼𝘄𝗻 𝘆𝗼𝘂𝗿 𝗺𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 💥 Traditionally, companies plan fixed annual budgets, allocate these to existing channels and only make slight changes throughout the year. ⚙ In today’s fast paced world this approach can often be very misleading. 🚨 Agile budgeting refers to continuously reviewing and adjusting budgets based on data to be more responsive and shift focus to best performing channels. ✅ 𝗛𝗼𝘄 𝘁𝗼 𝗶𝗺𝗽𝗹𝗲𝗺𝗲𝗻𝘁 𝗮𝗴𝗶𝗹𝗲 𝗯𝘂𝗱𝗴𝗲𝘁𝗶𝗻𝗴 𝗶𝗻 𝘆𝗼𝘂𝗿 𝗺𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆: ♻ Shorter Planning Cycles: Break down annual plans into quarterly or even monthly budgets, giving you more flexibility. 📊 Real-Time Tracking: Set up analytics dashboards and reporting tools to track key performance indicators (KPIs) for each campaign and channel. 🔎 Iterative Reviews: Regularly review budgeting with your team (weekly or bi-weekly). Discuss campaign performance and be ready to shift funds. 🌱 Embrace Flexibility: Be comfortable with the idea that your initial plan might change. Prioritize making adjustments based on data, rather than sticking to a rigid budget. 🔀 Cross-Functional Alignment: Work closely with finance teams to understand any constraints and ensure processes support nimble budget adjustments. What's your approach to budget planning? Let me know in the comments. 💬 - - - 🔔 Want to read more? Follow me Maximilian for regular posts and updates on #digitalmarketing, #lifeatgoogle and #career in tech.

🚀 𝗛𝗼𝘄 𝘁𝗼 𝗮𝘃𝗼𝗶𝗱 𝗰𝗼𝘀𝘁 𝗼𝘃𝗲𝗿𝗿𝘂𝗻𝘀 𝗶𝗻 𝘆𝗼𝘂𝗿 𝗽𝗿𝗼𝗷𝗲𝗰𝘁𝘀 — 𝘄𝗶𝘁𝗵𝗼𝘂𝘁 𝗯𝗲𝗰𝗼𝗺𝗶𝗻𝗴 𝗮 𝗯𝘂𝗱𝗴𝗲𝘁 𝗺𝗶𝗰𝗿𝗼𝗺𝗮𝗻𝗮𝗴𝗲𝗿 Cost overruns don’t come out of nowhere. They’re the result of decisions, blind spots, and bad assumptions made early on. Here’s a practical checklist to keep your next project on budget — without losing your sanity (or your sponsor’s trust): ✅ 𝟭. 𝗦𝘁𝗮𝗿𝘁 𝘄𝗶𝘁𝗵 𝗿𝘂𝘁𝗵𝗹𝗲𝘀𝘀 𝗰𝗹𝗮𝗿𝗶𝘁𝘆 If your goals, scope, and success criteria are fuzzy, your numbers will be fiction. → Spend more time on alignment than estimates. ✅ 𝟮. 𝗕𝘂𝗱𝗴𝗲𝘁 𝗳𝗼𝗿 𝗰𝗵𝗮𝗻𝗴𝗲 — 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗱𝗲𝗹𝗶𝘃𝗲𝗿𝘆 Projects evolve. Scope shifts. People leave. → Set aside a formal “change reserve” and update it monthly. ✅ 𝟯. 𝗨𝘀𝗲 𝗿𝗲𝗮𝗹 𝗱𝗮𝘁𝗮, 𝗻𝗼𝘁 𝘄𝗶𝘀𝗵𝗳𝘂𝗹 𝘁𝗵𝗶𝗻𝗸𝗶𝗻𝗴 Historical data beats optimism. Always. → Where data is lacking, use AI to simulate risk-weighted scenarios. ✅ 𝟰. 𝗧𝗿𝗮𝗰𝗸 𝗵𝗶𝗱𝗱𝗲𝗻 𝗰𝗼𝘀𝘁 𝗱𝗿𝗶𝘃𝗲𝗿𝘀 Integration. Training. Stakeholder resistance. Opportunity costs. → Budget what you don’t see on the Gantt chart. ✅ 𝟱. 𝗧𝗿𝗲𝗮𝘁 𝗿𝗶𝘀𝗸 𝗹𝗶𝗸𝗲 𝗮 𝗹𝗶𝗻𝗲 𝗶𝘁𝗲𝗺 Risks aren’t just flags—they’re financial factors. → Quantify risk exposure and include it in your base forecast. ✅ 𝟲. 𝗔𝘀𝘀𝗶𝗴𝗻 𝗯𝘂𝗱𝗴𝗲𝘁 𝗼𝘄𝗻𝗲𝗿𝘀𝗵𝗶𝗽 No one owns the numbers = everyone overspends. → Make ownership visible and tied to KPIs. ✅ 𝟳. 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗲 𝗰𝗼𝘀𝘁 𝗰𝗼𝗻𝘁𝗲𝘅𝘁, 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗰𝗼𝘀𝘁 𝗰𝗼𝗻𝘁𝗿𝗼𝗹 Stakeholders need to see tradeoffs, not just numbers. → Frame your budget around value decisions, not just accounting. 💡 Every budget tells a story. Make sure yours isn’t a fiction. Which of these 7 shifts could help your team the most right now? ♻️ Repost to help project teams stop burning money through vague planning. 💾 Save this post for later—it’s your on-the-go checklist to budget integrity. ➕ And follow Markus Kopko ✨ for more. #projectleadership #budgeting #projectsuccess

The budgeting process is currently underway, and it's essential to ensure that every step is carefully executed for optimal results. Here are 7 key steps to streamline and enhance your budgeting operations: 1. Define Timelines, Roles, and Deliverables: Start by setting clear goals, assigning responsibilities, and establishing a timeline with critical milestones to ensure the process stays on track. 2. Review Historical Performance: Dive into past financial data to identify trends and patterns that will inform and improve this year’s budgeting decisions. 3. Forecast Future Trends: Project future revenues and expenses while taking into account external factors such as market conditions, competition, and technology shifts. 4. Set Financial Targets: Translate strategic goals into measurable financial targets for each department, aligning objectives across the business. 5. Develop Departmental Action Plans: Ensure each department develops a comprehensive action plan detailing how they will meet their financial targets. 6. Create Department Budget Projections: Estimate the costs and revenues for each department, which will contribute to drafting the overall budget. 7. Consolidate and Finalise the Budget: Bring together all departmental budgets, review them thoroughly, and refine them for approval by senior management. By following these steps, your budgeting process will remain structured, efficient, and aligned with your strategic goals.

Budgeting in EPC (Engineering, Procurement, and Construction) Projects: *Budgeting Process:* 1. Define project scope and objectives 2. Identify cost elements (labor, materials, equipment, services) 3. Estimate costs using historical data, industry benchmarks, or expert judgment 4. Develop a detailed budget breakdown (WBS - Work Breakdown Structure) 5. Establish budget contingencies for risks and uncertainties 6. Review and approve budget with stakeholders *Budget Components:* 1. Engineering costs (design, drafting, engineering services) 2. Procurement costs (equipment, materials, services) 3. Construction costs (labor, equipment, materials) 4. Project management costs (PMO, coordination, oversight) 5. Quality control and assurance costs 6. Safety and environmental costs 7. Commissioning and startup costs 8. Contingency funds (unexpected expenses) *Budgeting Methods:* 1. Bottom-up estimating (detailed estimates for each activity) 2. Top-down estimating (high-level estimates based on similar projects) 3. Parametric estimating (using historical data and statistical models) 4. Analogous estimating (comparing to similar projects) 5. Expert judgment (using experienced professionals' opinions) *Budgeting Tools:* 1. Spreadsheets (e.g., Microsoft Excel) 2. Project management software (e.g., Primavera, MS Project) 3. Cost estimation software (e.g., CostOS, Esticom) 4. Earned Value Management (EVM) systems *Budget Monitoring and Control:* 1. Regular budget reviews and updates 2. Variance analysis (identifying deviations from budget) 3. Cost reporting and tracking 4. Change management (approving and documenting changes) 5. Forecasting and re-estimation *Challenges in Budgeting:* 1. Uncertainty and risks 2. Complexity and scope changes 3. Inaccurate estimating 4. Inflation and currency fluctuations 5. Stakeholder expectations and communication *Best Practices:* 1. Develop a comprehensive budget plan 2. Use multiple estimating methods 3. Establish clear budget responsibilities 4. Monitor and control costs regularly 5. Communicate budget changes and variances to stakeholders By following these guidelines and best practices, EPC project teams can develop accurate and comprehensive budgets, ensuring successful project delivery.

Most budget debates sound like this: Let’s put $100K into Channel X because last quarter ROI looked solid. Translation: You’re gambling on a single point estimate. I introduce confidence bands, an idea borrowed from finance, to make marketing spend a calculated risk, not roulette. How it works: 1️⃣ Model Return Distribution: ↳ Take the last 12 months of channel ROI. ↳ Build a simple 80 % confidence interval (CI). ↳ GA4 + BigQuery make this a two‑line SQL script. 2️⃣ Assign Risk Tiers: ↳ Channels with narrow CIs = predictable (low risk). ↳ Wide CIs = volatile (high risk). ↳ Create three tiers: Core. Growth. Experimental. 3️⃣ Allocate by Risk Appetite: ↳ Core gets stable funding. ↳ Growth receives incremental budget as long as ROI stays within band. ↳ Experimental gets capped spend, think venture bets with predefined exit rules. Result: Budgets adjust automatically to performance volatility, not politics. One e‑commerce client reallocated 15 % of ad spend from volatile display ads to a stable influencer program and saw a 26 % lift in blended ROAS, no additional dollars required. Executives love it because it turns marketing magic into disciplined portfolio management. Which risk tier currently eats most of your budget? A) Core (predictable) B) Growth (moderate risk) C) Experimental (high risk)

The annual budgeting season is upon us, and below is a description of the typical process and how it should work, based on my experience. Phase 1: Planning & Preparation ➡ Strategic planning ➡ High-level alignment on targets for the budget process ➡ Review of models to ensure they are driver-based and templates are ready to be rolled forward ➡ Establish timing, format, deadlines, and calendars ➡ Development of templates Phase 2: Departmental/Budget Submission ➡ Share targets with budget leaders ➡ Work closely with them to understand revenue, hiring needs, operating expenses, and investment needs for the new year ➡ Consolidate the list of key risks and opportunities for each department ➡ Explore different scenarios and key driver sensitivities Phase 3: Consolidation & Review ➡ Roll up departmental plans while ensuring numbers tie ➡ Review for gaps between targets and the budget submission ➡ Review assumptions and any overly optimistic or pessimistic forecasts ➡ Revise until ready for board approval Phase 4: C-Suite & Board Approval ➡ C- Suite reviews plan and approves budget version ➡ Board reviews plan and recommends potential changes ➡ Once the Board and C-Susite are aligned, the plan becomes official Phase 5: Communication & Implementation ➡ The approved budget is communicated throughout the company ➡ Department heads receive approved budgets ➡ KPIs/performance targets updated, and implementation of tracking Phase 6: CFO and FP&A Debrief ➡ FP&A debriefs on how the process went and records improvement recommendations for next year ➡ Survey department heads for feedback on improvements ➡ Create an action plan to improve the process for next year Phase 7: Monitoring and rolling forecasts ➡ Reforecast throughout the year to reflect the latest conditions ➡ Review variances and implement changes to maximize performance Below are several key tips to keep in mind throughout the process. These are tips I have learned over the years that make the process go smoother. ⚫ Stay positive, as negativity will grow if you let it ⚫ Communicate, communicate, communicate, hold meetings frequently, daily if needed ⚫ Give yourself a buffer when developing the calendar, and make sure you allow for potential slippage ⚫ Only ask the business for what you need; do not include everything in the template you give them.  Do as much work as you can for them and only focus their time and attention on the material items ⚫ Never submit a number the business has not seen. If you do inform them immediately of the change and who authorized it ⚫ Review all business assumptions and make sure they are supportable ⚫ Stay calm and remember it is just a budget Join me this Thursday, September 4th, at 11:00 AM EDT for a webinar on budgeting with Rohan Kapil from Jedox Link to register: https://lnkd.in/gjtP6UXj Let me know in the comments what you would add.