How do you manage budgets?

In your Project Manager interview you may come across questions that pertain to how you have ran finances, specifically budgets in the past. The best way to answer these questions is to follow the following structure;

1) Keeping Team Member and Stakeholders Informed:

In management information is key, so the more information that people have the better they can make business decisions. A team that has full knowledge is one that can better take ownership of the project and is more likely to succeed.  Also if there is information sharing there is a better chance of someone noticing any mistakes or errors that may have gone unnoticed. When it comes to financials and budgeting the smallest mistake can alter the forecasts which will affect the project.  With more of an eye on your budget there is also a smaller chance that people will charge for items that can be classed as gray or dubious. An example of this is billing work hours that cannot be proven to be actual "work".

2) Continually report and forecast resource usage:

Projects are run in a changing world which requires continual forecasting and calculating of spend so that you do not have budget overrun. Even if the continued work on the budget reduces over run by say 2%, that could be critical on a project of say $10,000,000 in which 2% is $200,000. By having the correct resources and the right number of resources working on individual projects you are more likely to succeed with the project. Regularly considering the resource allocation is an important step to accurate way to manage budget.

3) Managing Unplanned work and Scope Creep:

One of the biggest reasons why projects go over budget is down to the unplanned work that was not budgeted for in the beginning. Each unit of billable hours to take care of these issues puts the task of being on budget further and further from reality and will push the projects requirements more.  Using change orders to authorize funding for the additional costs and a revised budget will keep the project on track, however accurately planning ahead for scope creep will eliminate the need for these measures.
Key Points:

  •     Always keep an eye on the budget
  •     Always communicate with team about accurate billing and scope creep
  •     Regulary update current and projected resource usage
  •     Keep on top of team billing hours