Project Budgeting: An Interview with Sol Benady
Sol Benady is a management consultant, Fintech entrepreneur, and program manager working in the banking sector.
He started his career as an auditor in London, trained with E&Y where he qualified as an accountant, and then moved into consulting for retail and investment banking for a wide range of projects and clients. In 2015 he moved into banking and spent time working on, amongst other things, Brexit plans for the bank.
I talked to him in the Project Management Club on Clubhouse about project financial management and handling budgets.
From Accounting to Program Management
Business acumen and financial skills help you to do so many things and allow you to demonstrate how your project is going to contribute to the organization. Sol feels that project accounting plays a major role, “[It] is one of the most important parts of project management. It doesn’t only measure what you can do, it measures success.”
Sol feels that those with accountancy backgrounds have an edge – especially in building client trust, but there are still opportunities to build accounting knowledge even if it isn’t your specialization, “[E&Y] encourage anyone in the firm to do an accountancy certification. The accountancy certification is a broad business qualification with a lot of broad backgrounds and clients trust you a bit more if you have a bit of financial acumen.”
This doesn’t mean every project or program manager needs to be an accounting whiz but having a handle on project finances is indeed a make or break, “You have to try to keep within your numbers to deliver successfully,” Sol adds.
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5 Tips for Managing a Project Budget
We know that keeping on top of your budget is key when it comes to managing projects. So we asked Sol his top tips for budgeting:
1. Define the project scope
Defining a project scope is the first step to creating a project budget. Speak to all the stakeholders and the client to get a full understanding of what the project is going to involve so you can create a comprehensive budget for the work.
2. Use a budget template
When you start getting into the numbers, it’s important to have a strong and extensive project budget. Sol has a range of project budget templates drawn from past projects. He says that there will be people in your team who have worked on similar projects, for example, a target operating model or regulatory project, and their documents will fit the needs of your project. Then you tweak and amend the template to fit the exact scope you are working towards.
3. Create a baseline
An important activity is to create a baseline. There are two considerations for creating a budget: the top-down and the bottom-up detail you will be working towards. Sol says he doesn’t get a blank cheque for any project. There is usually a top-down budget: for example, a project sponsor will say that they expect the project to be delivered within a budget of £2m. To understand whether that’s enough, you have to create a bottom-up plan with the detail.
What tends to happen in reality is that the £2m you’ve been given is not enough to deliver the scope, so you have to bridge that gap. There are several levels and cycles of discussion and planning to have in order to bridge that gap.
When you are planning resources it’s always good to have up-to-date timesheets and rate cards for that planning, as things change from year to year. Make sure the assumptions you are making are sound and you aren’t caught out partway through the project.
4. Have a risk budget
One thing that’s important to have is a risk budget. There will be scope creep and things that happen during the project that are not expected. So you need to have a bit of buffer in there to deal with difficulties e.g. you’ve forgotten a lesson learned from past projects.
5. Set up a dashboard
Another good practice is to have a project dashboard that builds in the numbers. Have a few key metrics that you are measuring throughout the project. It’s always good to have a high-level but concise and effective dashboard and status reporting template in order to deliver status updates to either the client, a regulator, or another stakeholder.
The metrics to use include:
- Current cost
- Target cost
- Actuals vs year to date budget
- Run rate for the project
- Cost-benefit ratios.
Explaining ‘Run Rate’
When you are looking at the phase of the plan, all projects are cyclical. Your spend won’t be uniform across the months necessarily, so the run rate may be deceiving. Sol recommends splitting the project into months or weeks.
For a more accurate run rate, look at the last quarter or last two quarters and take an average of that. You can use that figure as a way to apportion the budget over the project duration and track against it.
Iterating the Budget in an
In terms of
Tips for Talking About Budget Overruns
One of the things that people are most bothered about in my experience is what to do when the budget has gone over or is at risk of being overspent. Setting up a plan to regularly discuss the budget takes the mystery away, “It’s important to have a governance framework with monthly checkpoints and a monthly meeting. There is a monthly cycle where people submit their monthly forecasts. Forecast vs target is reviewed at those meetings,” Sol explains.
It’s tricky to approach conversations about budget overruns, but if it’s an ongoing discussion your team will already see it coming and be able to address it right away. Sol agrees, “During the monthly checkpoint, the team would look at the project run rate and if you are going over then the team has to provide a path to green, or conversation about why they need more money.
“If your initial budget was sound then any overruns or additional expenses shouldn’t be a surprise. There is likely to be something that comes up in scope or an unexpected event on a project, but then you should be able to communicate that to stakeholders. If you did get some of the calculations or estimates wrong, then the monthly governance checkpoints provide an opportunity to explore and explain that.“
Asking for More Money
It looks like you’re project is running out of funds, so how do you approach the conversation about asking for more money? Document it as soon as possible and share it, it’s much harder to justify if no one has heard of the reason. Raise the alarm early on if there is a surprise, don’t hide things, and communicate the risks and issues.
The conversation itself might go in several ways. You should tailor it to the audience. Management will have targets and benchmarks that they need to meet so you need to have a trade-off — prioritize certain activities over others. If you go over budget on one workstream, can you cut back on scope in another? You need to prioritize within your budget as you may not be able to go over it.
Sol agrees, “An old MD of mine said, when you come to me with a problem, come with a solution as well. Have an idea of how you will remediate it or mitigate it. Always try, when delivering bad news, to make sure that you have thought of all the different options to mitigate that, and present that recommendation when you present the problem. Otherwise, you might look unprepared and not proactive.”
It might not be the most riveting part of project management, but financial management is important. In summary:
- Ensure that the scope is clearly defined and you’ve communicated exactly what the project brief is.
- Have an effective project budget template in a bespoke tool or a spreadsheet to understand what numbers you should be expecting and what the output should be.
- Have a clear baseline so that the top-down and bottom-up plans can bridge the gap on any pressure you have from management.
- Have dashboard and status reporting templates.
Sol encourages project managers who do not feel confidently financially literate to seek out courses and get up to speed on project budgeting. In the current cost environment, people are looking to tighten their purse strings and he thinks this area of project management will become an even more important aspect of our work.
Wondering how to create a project budget from scratch? Here’s our step-by-step guide to creating a project budget.
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