Managing an export or import budget is crucial to ensure that your operations are more effective.
Although budget is only one aspect that determines the success of a project, it is an important one: 28% of project failures are attributed to inaccurate cost estimates.
It takes skill and experience to correctly forecast the cost of a project and, as you will read below, even the most skilled project managers often need a team to support their efforts.
At Ibridge Capital, we talk to a variety of clients about ways to structure cost data for their foreign trade projects. As a result, we have gained a lot of insight into the project budgeting process and the different approaches to project budget management.
Our Main Budgeting and Project Management Methods
There are multiple ways to approach project budgeting. All companies have different types of projects, different ways of operating and different resources, making it difficult to create a project management budget template that can be used by all organizations.
In the end, it may simply be up to your organization’s project management office to determine the approach for you.
Some of the most common project management budgeting methods are:
- Bottom-up: this approach involves examining the individual components of a project, assigning costs to each, and then adding them up to arrive at an estimated cost. This approach typically involves employees from different departments describing the tasks and steps required to complete their part of the project.
- Top-down: is the opposite of bottom-up, in which one starts with an idea of the total project and divides it up, assigning parts to the various project tasks. In formulating the original figure, management may take into account the cost of previous projects, previous budgets, current economic conditions, etc.
- Three-point estimate: this method takes into account the best and worst case cost scenarios for each project task, along with a figure representing the most likely estimate; these figures are reconciled to estimate a budget. This method can be useful because it specifically takes into account the risks of a project..
- Parametric estimation: This method breaks down the project into several tasks and uses specific parameters based on industry data and previous projects to estimate costs. This method is quite accurate, but also quite sophisticated, and is not as commonly used as the previous three methods.
- Analogous estimate: This method involves estimating the cost of a current project by looking at the cost of similar past projects. If the projects are very similar, this method can be accurate, but in general, ensure that appropriate comparisons are made to ensure that the most reliable cost estimate is produced..
In short
All organizations want to deliver projects successfully; the key to achieving this is to be able to accurately predict project costs, and to do so consistently.
Project budget management is not easy, but your process will likely mature over time.
By continually reviewing not only the results of the projects (were they under or over budget and why?), but also what contributed to those results.
At IBridge Capital we can help you develop a more sophisticated approach to budgeting.
Not only does it provide you with a unique perspective on your projects in relation to company objectives, but it also gives you the support you need as a project manager to effectively track and report on budgets in a way that works for you.
Are you interested in working with us? Feel free to contact us without obligation. If you are ready to see what your budget numbers look like let us know.