How to track a project budget accurately and effortlessly
Last updated on
October 14, 2020
Budgets are notoriously difficult creatures. Even if you’ve created a solid budget estimate, you still need to scrupulously manage its spend to ensure your project stays profitable. Without tracking project budgets, you can’t ensure your team spends the right amount of resource on each task and sticks to your priorities. It can make the difference between catching miscommunications and scope creep early, and dealing with an expensive clean-up job.
But how do you actually go about it? How can you track a project budget without spending a ton of additional effort? And how do you ensure the numbers you report are actually accurate?
Why budget tracking matters
Overseeing a project budget is a pretty big responsibility – you’re not only coordinating costs and managing risk, but making sure the rate at which you spend your budget is “healthy”. It almost goes without saying, but if you don’t track your costs, you risk facing one of the worst scenarios of all: overspending or running out of money halfway through a project. By making a habit of checking budget spend, you can help keep your team on-track, update stakeholders with key milestones, and calculate the profitability of each stage of the project – all while avoiding disasters.
Project budget tracking can be as straightforward as seeing how different project phases absorb your budget, or as granular as breaking spend down by individual project task – like scoping, iteration, building and QA. The latter is especially useful for managing the non-billable work – like internal team communication and project management itself – which can drink your profits.
The benefits of budget tracking
Accurate budget tracking makes a whole lot of sense when it comes to managing expectations, strengthening relationships and covering your own back. It helps you stay transparent and accountable in the eyes of stakeholders – showing exactly how retainers and resources are being used.
It also makes it easier to feed back process or communicational improvements to clients themselves, by showing the cost implications of dramatic directional changes, protracted iterations and unclear briefs. You’ll be able to align better on “meaningful budgeting” – especially when it comes to clients appreciating just how much things actually cost. In the end, that understanding makes for better quality, more cost-efficient products.
Obviously, budget tracking can also help increase your profitability. It highlights project risks, qualifies the true cost of different tasks, and surfaces all the internal work that goes into planning, organizing and delivering projects. With these insights, you can set more competitive project rates and ensure all your costs are covered.
How to track a project budget
There are two main ways to go about tracking a project budget: the DIY way and the automatic way.
DIY budget tracking
This is your standard, manual approach to budget tracking using a spreadsheet tool like Excel to enter and crunch numbers – either by adding them manually, row by row, or importing them from all your project management apps. If you have the time, it’s definitely the cheaper option. But manual data entry itself comes with the hugely expensive potential for human error, which can completely undermine the whole endeavour of accurate budget tracking.
This can be a painstaking process, and requires a heroic amount of patience and precision. While Excel templates are available, they require a lot of customization to reflect the way your team actually works. If you’re looking to integrate project tool data, be prepared to hash around with different file types, formats and formulas.
Automatic budget tracking
This is the latest response to project budget tracking, which essentially outsources the entire task to smart, automatic software. You just assign your project a time or money budget, and your tool automatically tracks and offsets all your team’s project work.
Using Timely as an example, you can break down budget spend by individual task, project phase and even employee. Employees themselves can have a blanket hourly rate, or a specific project rate – making it easy to account for any external contractors you bring into your team. For longer projects and retainers, there’s also the option to track recurring budgets.
A quick Google reveals there are lot of project management tools out there. But different tools have different specialisms, depending on which aspect of the project management lifecycle you want to focus on. Not everyone can afford the heavy-weight project management software, and their sheer feature set can make them difficult to use – if not lagging behind more focused project management apps. When looking for project tracking software, you only really need to ensure they include these staple features:
Intuitive dashboards that break down your most important project data are essential. You don’t want to have to dig for information every time you need to quickly update a stakeholder. They also make a huge amount of sense if you’re managing multiple projects at once – providing a panopticon overview of all project performance from one clean space.
Tagging is a no-brainer if you’re looking to break down budget consumption by project task or individual employee. You can also use them to categorize project work under phases, which provides a useful overview of budget requirements across resources and skills.
The best budget tracking tools are proactive, not reactive – they reach out to you with important real-time budget information, like when spend hits a particular milestone. Thoughtful budget notifications ensure you don’t have to be in the tool all the time to stay in the loop. You should be able to tailor them to your devices and communication preferences – be it a mobile push, email or desktop notification.