Meeting Your Forecast Budget Spend Rate

Problem:

Some projects have budget allocated to them, rather than being funded by a purchase order or contract or similar. This is particularly the case with internal projects or government funded projects.

Many organisations or government departments require that project managers forecast the budget that they need for their project and forecast the monthly spend of that budget. If that budget is not spent at the rate forecast, the budget may be allocated elsewhere, and the project manager may not be able to get it back (to use later on in the project). The department / organisation financial team may try to move that budget away from your project.

This can particularly apply to large projects, where they may want to move money from one section to another (i.e. move money out of your section of the project and into another section of the project, meaning you have to deliver your scope with less budget).

This is effectively the spend it or lose it problem, but not just for the financial year.

Solution:

If your project is not spending money at a rate similar to that budgeted and forecast, you should be able to show why.

You need to keep records of what has caused the delay in spending, and present it in a format such that you can convince managers or the accountants why you should be able to keep the budget for your project rather than lose it completely.

There are many reasons that may be acceptable, but they should be explained clearly and shown to be outside of your control. Such as:

  • Unavailability of staff to book time to the project
  • Wet weather delays
  • Industrial disputes
  • Design standard changes (industry wide)

There may be lots of other reasons including the ones below, but be careful with these, as your managers (or your organisation policies) may require you to have acted to mitigate these (such as apply penalties on your contractors, or to fill out forms to change the project):

You should keep track (including updating gantt charts or similar) of what work has been delayed, who has been moved on/off the project, the number of days of delay caused by weather or industrial disputes etc.

Good, clear documentation (including a nice summary “dashboard” report) will usually save you from losing your budget. Your budget will become a difficult target, and the people seeking budget will move on to targeting other projects for their budget (targeting those project managers who cannot substantiate why they should still keep their budget).

Lesson:

Track your budget spend against forecast spend per month. Document why your project (or project section) is underspent, and make clear reports that provide good reasons why your project should not lose some of its budget.

Without clear support for your budget spend rate, you may lose some of your budget to other projects, and still be expected to deliver the full scope with the remaining budget.

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