Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition

Creating a Project Budget

In our previous work, The Essentials of Strategic Project Management, we covered in great detail the process of initiating and planning projects. We will review the first two phases of project management briefly here and cover only the development of the project budget in detail.

During project initiation, the project charter is created, which contains crucial information about the project, including client goals and objectives, specific project goals, and information about various stakeholders. Most important, the project charter describes the project's high-level deliverables. It also describes project success, what it is and how it will be measured.

During project planning, the project team starts with the high-level deliverables and creates a work breakdown structure that describes the detailed work tasks that must be completed. A project schedule is then created, linking the work tasks in their proper order and showing what must be done when. Next, resources are defined for the project, both people and materials. Once this has been done, the project team has a great deal of information about the project:

• Detailed deliverables with notations as to what they are and what they do
• A set of tasks that describe the work necessary to complete the deliverables
• A list of resources needs to complete the tasks, including personnel and other resources
• Estimates of the effort needed from the resources to complete the tasks
• A list of constraints about resources ...