Budgeting and Forecasting
How to create a budget and how to keep it on track
Most likely if you are running a project a huge factor as to whether it will happen or not will be "How much?" and the likelihood of success can depend upon how well you have budgeted to start, and then how well you can keep a track of costs.
This is where the budget has been defined. What do you think are the drawbacks here?
Sometimes you are given the parameters. "My party budget is £2000 and everything has to be included in that" or "We're creating the product and it needs to cost no more than £9.99 to the consumer"
Pros - you know exactly what you have to spend from the start and you can scope what's available for that fee.
Cons - what they want may not fit within the budget, it doesn't allow for contingencies (or a contingency has to be paid for within it). You may also have to allow for a commercial margin within it that can further hinder what you can do.
This is where the budget is based upon what has happened previously.
Pros: You have a really good idea of what it cost last time, and why it costed that.
Cons: Are you doing exactly the same? Has anything changed? Taxes? Interest rates? Weather? People's rates? The expectation from finance holders is that the cost from the first time was a pilot and savings could be made.
This is where there is no set budget.
It may be that you and the finance team do not have a set idea for how much this will cost.
Pros: It's a great way to scope the market. You'll have the best idea of how much your event / product could cost from the research you have done. You'll have a good understanding of time and quality variations and how much these effect the price.
Cons: You'll need to do a lot of research for providers, get different quotes for every aspect of the job. It can be time consuming. You may not get the price you want and have to do even more research or negotiation before the budget is signed off.
The often forgot part of any budget. They are the functional non fun bits that you will still need to make sure your event or production happens. You've ordered 500 invites and the price looks great, but have you factored in the time to write the names and addresses on, have you covered the postage costs and the time to gather up the RSVPs. For a business this can also be HR time, IT costs, Salaries and benefits, which are sometimes added as a percentage line or a fixed cost.
Ensure you factor in costs that are linked to subscriptions or annual fees - are you best paying as a one off or licencing something at a higher cost for longer use? Some deliverables may require you to have fees paid for a number of years - check that you have all of this covered as you need it.
Consider what will happen if the numbers increase, what else could increase? You should budget for what you have been asked, but if there are options that create a significant saving or spend, you should be making the finance team aware. Adding an additional guest may increase the room size and cost. Reducing the numbers at a late stage may mean budget is wasted and cannot be reallocated. If there are agreements and contingencies that make up your budget always flag them in advance.
Predicting the future / forecasting, wip, phasing spend
Once a budget is signed off depending upon size or the time in which it is spent you may find that the finance team want you to 'phase the spend' - simply put, work out when you need to spend each element of the budget.
At certain points in running the signed off budget, you'll also need to track how the costs are going and potentially forecast the next few months - this can be important if there are delays or other factors are coming to light which may increase spend.
It's always important though to keep an up to date WIP (work in progress) or tracker for your budget. A budget can quickly go into overspend and you may need to reconsider spend in other areas before it goes over.
Last but by no means least is factoring in a contingency. You are not able to predict the future, but if you have researched and costed as much as possible you should be in a really good way. Some people just add in a 10% or higher factor as a contingency plan on the end of the budget. I on the other hand like to add it in where I think it is most needed after I have done my research. Does the fixed cost of stamps need a contingency - probably not, but if I misspell names on the bespoke invitations, should I probably order a few extra just in case? My outdoors event - all signs look great on the weather, but what if it gets too hot and I need to buy water and fans for everyone? Research and a healthy dose of pessimism can help here.
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