Budgeting
Budgeting is the process of creating a plan for how to spend and allocate financial resources. In the context of technology and engineering, budgeting involves forecasting and managing expenses related to projects, research, development, and infrastructure. It helps ensure that resources are used efficiently and effectively to support technological advancements and innovation.
5 Key excerpts on "Budgeting"
- Frank Bannister(Author)
- 2012(Publication Date)
- Routledge(Publisher)
...For example, in organizations which do not sell IT as a service, the following might be a common perception of IT Budgeting: ‘IT Budgeting is the process of setting short-term (usually one year) targets for all IT expenditure.’ This definition is only partially complete. A better definition is: ‘IT Budgeting is the process of converting the (physical) corporate and departmental IT plans into corporate and departmental financial plans which can be used as one of the methods of monitoring and controlling IT expenditure.’ The rationale for this long winded definition is to stress the close relationship between the IT plan and the IT budget on the one hand and IT budget and financial control on the other. Most IT Budgeting is about expenditure, and this is made up of the costs of: • continuing support of current systems • continuing maintenance of current systems • enhancement to current systems • replacement of current systems • new systems. The development of an IT budget needs to take into account each of these. It also needs to take account of the integrated nature of IT. The above picture is complicated by a number of factors. First, some IT expenditure is infrastructural in nature. Not all IT expenditure can be mapped directly onto a particular user, department or even application. For example, a decision to replace the current coaxial cabling in the local area network with fibre optic cable may affect every system, new and old in the building. Some expenditure is enterprise-wide and, as a consequence, IT budgets have many dimensions. Figure 5.1 illustrates this principle. Figure 5.1 Even Figure 5.1 does not represent the full picture. IT expenditure may be analysed by: • expenditure heading (e.g. staff costs, insurance, licences, etc.) • type (i.e. hardware, software, communications, etc.) • department • time • scenario (budget, actual, forecast) • source (i.e...
eBook - ePub- Jack R. Meredith, Scott M. Shafer, Samuel J. Mantel, Jr., Margaret M. Sutton(Authors)
- 2016(Publication Date)
- Wiley(Publisher)
...CHAPTER 4 Budgeting the Project Having finished the planning for the technical aspects of the project, there is one more important element of planning to finish that will then result in the final go‐ahead from top management to initiate the project. A budget must be developed in order to obtain the resources needed to accomplish the project's objectives. A budget is simply a plan for allocating organizational resources to the project activities. PMBOK covers the topic of Budgeting in Chapter 7 on Cost. But the budget also serves another purpose: It ties the project to the organization's aims and objectives through organizational policy. For example, NASA's Mars Pathfinder‐Rover mission embedded a new NASA policy—to achieve a set of limited exploration opportunities at extremely limited cost. In 1976, NASA's two Viking‐Mars Lander missions cost $3 billion to develop. In 1997, however, the Pathfinder‐Rover mission cost only $175 million to develop, a whopping 94 percent reduction. The difference was the change in organizational policy from a design‐to‐performance orientation to a design‐to‐cost orientation. In Chapter 3, we described the project planning process as a set of steps that began with the overall project plan and then divided and subdivided the plan's elements into smaller and smaller pieces that could finally be sequenced, assigned, scheduled, and budgeted. Hence, the project budget is nothing more than the project plan, based on the WBS, expressed in monetary terms. Once the budget is developed, it acts as a tool for upper management to monitor and guide the project. As we will see later in this chapter, it is a necessary managerial tool, but it is not sufficient. Appropriate data must be collected and accurately reported in a timely manner or the value of the budget to identify current financial problems or anticipate upcoming ones will be lost...
eBook - ePub- Ray R. Venkataraman, Jeffrey K. Pinto(Authors)
- 2011(Publication Date)
- Wiley(Publisher)
...Chapter 4 Project Budgeting In the last chapter, we examined the various concepts, approaches, and problems related to cost estimation. Here, we discuss project Budgeting, which is inextricably linked with estimation in that both processes deal with the cost of completing an activity, work package, or project. Once cost estimates are approved, they become project budgets that allocate resources with an agreed-upon, contracted amount of what work should cost. Budgets serve a vital role in the management of projects. They function as a control mechanism that sets the standard against which future expenditures will be monitored. With timely data collection and reporting, they enable the project team to identify and report current problems, and to anticipate future ones. And when done properly, they relate the use of resources with the achievement of corporate goals. In most organizations, there are two kinds of budgets: project budgets and fiscal operating budgets. The difference between the two is that a project budget covers the entire duration of a single project, while a fiscal operating budget applies to a single year. In this chapter, we examine the various aspects and approaches to project Budgeting, including time-phased project Budgeting. 4.1 Issues in Project Budgeting A project budget identifies the project’s allocated resources, goals, and the schedule that allows the organization to achieve those goals. Developing a project budget requires not only a knowledge of the resources needed, but also information regarding how many will be needed and when, as well as how much they will cost. Because each project is unique, the Budgeting process for project organizations is considerably more complex than for traditional organizations. Project managers may not have the luxury of accessing and using the historical information that is typically available for ongoing, routine activities...
eBook - ePubManaging Technology-Based Projects
Tools, Techniques, People and Business Processes
- Hans J. Thamhain(Author)
- 2014(Publication Date)
- Wiley(Publisher)
...Budgets are crucial management tools, not only for the project organization, but also for supporting resource departments throughout the enterprise, contractors, and partner organizations. The Budgeting process starts with the cost baseline, that is the aggregation of cost estimates for all cost accounts (e.g., work packages and subsystems), across all stages of the project life cycle. However, budgets usually differ from cost estimates because they should include lessons learned, funding limitations, risk factors, and other business considerations that affect the budged realities beyond itemized cost estimating. Therefore, the cost baseline needs to be reviewed and modified to be consistent with the budget. Because of these dynamics, many of the interdependent project planning activities, such as scoping, scheduling, cost estimating, and Budgeting, are being performed concurrently. When working the Budgeting process, it is further important for the project manager to collaborate with the team members responsible for implementing the plan regarding scoping the work and schedule to fit the budget constraints and ensure cost-realism. The Budgeting process is filled with emotions. Each group is trying to get its “fair share” of the available resources. Matching the scope and schedule with the budget usually requires considerable negotiations among all parties, project leaders, team members, supporting resource managers, senior management and the sponsor organization. While often stressful and time-consuming, this total team involvement has important side benefits of leading to consensus on the budget and ultimately commitment to the project plan that should be an updated document reflecting all adjustment made to the project scope, schedule, cost structure, and other elements that define the project requirements and its performance. 11.4 COST ESTIMATING AND Budgeting PHILOSOPHY Cost estimating and Budgeting are difficult tasks...
eBook - ePub- Anita Cassidy, Dan Cassidy(Authors)
- 2009(Publication Date)
- J. Ross Publishing(Publisher)
...THE Budgeting PROCESS A budget tells us what we can’t afford, but it doesn’t keep us from buying it. —William Feather Budgets are a key management tool for all areas of a business. Understanding the budget and the Budgeting process is critical before tackling cost reductions. Successfully managing IT requires more than an average level of sophistication and knowledge of Budgeting. Often, IT has one of the largest budgets in an organization, particularly one of the highest overhead budgets. In times of economic pressure, the IT budget comes under significant scrutiny. Budgeting for IT is more challenging because IT is a service organization that pays for tools and items used not only by IT itself but by the entire enterprise. This chapter assumes that IT management understands budgets, how they work, and knows basic financial terminology. However, it is equally important to understand the nuances of the Budgeting process, your company’s culture relative to budgets, and the politics surrounding the Budgeting approval process. Whether you are unfamiliar with the Budgeting process or you have been through IT Budgeting in the past, the following tips and practical advice will help to get your budget approved. The following areas are discussed: Budget. This section provides an overall understanding of the operating budget, operating costs versus capital costs, and managing to the budget. Financial options. This section reviews popular options, such as zero based Budgeting, purchasing versus capital or operating leases, and charging back IT costs. Communication. The Budgeting process provides an excellent educational tool for the organization because you will be able to communicate the IT environment and direction. This section discusses the importance of your relationship with Finance and the CFO, and outlines how you can minimize surprises or assumptions that hurt your credibility. It is important to communicate the IT budget in business terms...
