How do you create a budget for a project or a department? (2024)

Defining the scope is indeed a crucial first step in budget creation. However, it's worth emphasizing that scope isn't static - it evolves and changes. Constant alignment with stakeholders on shifting objectives, deliverables, and constraints is crucial. Budgeting should be an iterative process that mirrors the dynamic nature of the project or department. Additionally, remember that budgeting is more than meeting requirements and expectations. It should also serve as a tool for strategic decision-making, enabling the optimal allocation of resources for value maximization.

Defining the scope is a crucial first step in budgeting. It's like drawing the blueprint for our financial plan. By outlining our project's objectives, stakeholders, and constraints, we establish clear boundaries and expectations. This ensures that our budget aligns perfectly with our goals, making financial management smoother and more effective.

Estimating costs is a vital step in budgeting, with fixed and variable costs each requiring careful attention. But it's equally important to remember that cost estimation isn't a static process. Market conditions, resource availability, and project risks continuously change and these changes can affect costs. Regular reviews and adjustments to cost estimates can ensure the budget remains aligned with reality. Additionally, cost efficiency should be kept in mind. Striving for the optimal balance between costs and value delivered is essential. Remember, the cheapest option isn't always the best. Long-term value, sustainability, and strategic fit should drive budget decisions.

In my experience, cost estimation is like assembling a financial puzzle. You've got fixed costs that stay constant and variable costs that ebb and flow with your project. To nail it, you can use past records, specialized knowledge, market analysis, or take a detailed breakdown approach. The key is having rock-solid data sources and staying vigilant about potential budget surprises, like risks and uncertainties.

The process I use to prepare budgets is to actually complete the revenue section before completing the expense budget. then once the expense budget is completed during the comparison phase numbers are adjusted as needed to get a hopefully accurate budget for the year. Obviously unforeseen events will create variances but otherwise the budgeted and actual numbers should be close when done correctly.

Additionally, prioritize financial stability by diversifying income streams. Be agile in exploring new revenue sources and stay vigilant for opportunities while preparing for potential disruptions.

I would keep a 5 to 10% towards cost escalation and other contingencies in any budget. The percentage could vary depending on the country and place where your department or project is located. In more developed countries the contingency percentage could be a bit lower and in countries where procedures are slow and government and other external factors impact the project timelines, may take require more contingency. It is a call local to the location

Engaging stakeholders in budget communication and negotiation is like fine tuning a symphony. Each note matters, and adapting our approach to the audience and situation can create harmonious results.

(edited)

É importante os stakeholders serem envolvidos nos processos decisórios e posteriormente assumirem a responsabilidade de acompanharem periodicamente os resultados e revisões necessárias no planejamento orçamentário previsto e realizado, para atender a expectativa do shareholder.

Translated

Create a Period variance tracking report as well as year to date (YTD) variance report to understand how the specific period, in general, monthly period and in some instances quarterly, actuals to budget variance is and the all the periods leading upto the current period for the year (YTD) variance will give where one stands against the over all budget. This will make sure one is staying the course for the over all budget as well as monthly variations, so that one can understand if the variance is something that is needs to be adjusted for the entire year or one of situation

Venkat's suggestion to track period and YTD variances provides valuable insight into budget performance. Yet, it's important to remember that variance analysis is more than just comparing numbers. It's about understanding the story behind the numbers - the why. Why did the variance occur? Was it due to an internal issue, an external event, or a miscalculation in the estimate? Only by understanding the reasons can effective actions be taken. It’s not just about adjusting numbers, but potentially altering strategies, processes, or behaviors to address the root causes of the variance. Remember, budgeting is strategic management.

what's your projected occupancy for room service what kind projected occupancy of rooms what kind of % are u expecting for breakfast lunch and dinner....and much more