Project budgeting

A large number of the problems managers are facing in projects can be traced directly to the use of inappropriate budgeting and management techniques on project efforts. Although the engineering and construction worlds have successfully used Project Management for decades, the business world has only recently begun adopting its processes, sometimes without fully understanding them. This lack of understanding can actually increase project costs and decrease the quality of the end product. The key to effective project management is budgeting. Formal project budgeting differs from traditional functional budgeting, such as tested performance data or the Project Evaluation and Review Technique (PERT), in four fundamental ways: repetitiveness, basis, risk, and type of budget. The business community will benefit from understanding the differences between these budgeting processes. This article provides comparisons between functional budgeting and formal project budgeting.