The Project Budget is a tool used by project managers to estimate the total cost of a project. A Project Budget template includes a detailed estimate of all costs that are likely to be incurred before the project is completed.
Large commercial projects can have project budgets that are several pages long. Such projects often have a large number of costs associated with them such as labor costs, material procurement costs, and operating costs. The Project Budget itself is a dynamic document. It is continuously updated over the course of the project.
Initially, the Project Budget allows the project manager to determine how much the project is likely to cost. Throughout the course of the project, it lets the project manager check whether or not the project is sticking to its budget.
Let us look at the sample project budget template shown above. John is a project manager who is responsible for the completion of Project ABC. John organizes the project in a Work Breakdown Structure format (WBS format). Project ABC has 2 primary tasks. Each of these primary tasks has 3 secondary tasks associated with it. Finally, each secondary task has 2 tertiary tasks associated with it. Project ABC requires the use of labor and capital for its completion. The project budget template has separate sections for labor and capital.
For simplicity, it has been assumed that labor charges a specific wage rate for each of the primary tasks. In practice, wage rates can be different for each of the secondary and tertiary tasks. Moreover, some complex projects may require the use of other resources in addition to labor and capital.
Let us look at Task 1: At the start of the project, John estimates the following about Task 1.
Having made the above estimates, John gets to work with project ABC. However, when task 1 is finished, John realizes the following:
The same process is repeated for task 2. As can be seen from the project budget template above, Project ABC overshot its budget by $420.