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 Management of cost  Management of cost   Project Measurement   Project Measurement

Manage   »   Cost   »   Budgets


So before we deliver to budget, we should understand what we mean by budgets.

Do not worry we will get on to more interesting stuff later on. Have a look at the size of the Toolkit. It is not big. We will get through this and when we do, you will be ready to begin your project using The Big Agile Toolkit. Meanwhile we need a little background information to get us underway. We often use the phrase budget. So let us ask the question. What is a budget?

A budget is a financial representation of an agreement that supports the delivery of something tangible. It is no more. The budget is often fixed at the start of a project and remains this elusive worrying numerical amount throughout.

The concern, that a budget may need to be increased at some point within a project, is the omnipresent threat to the project and maybe also the project manager. The concern that a budget may need to be reduced, at some point within a project, is not seen in the same way at all. Such a request to reduce a budget may be due to inaccuracy in the original estimate or the re-prioritisation of work. Regardless, this may be significant or pertinent to the project and is information that should be considered and the causes noted.

Budgets: we should remember come from yet another process, estimating. The budget is the financial representation of an estimate. Estimates however are only forecasts. The meaning of the word, forecast, is simple. It is a prediction of something that we believe will happen. Often this is a professional prediction. But it is a prediction nevertheless and a prediction can be as mythical and loose as a horoscope or as honest and rigorous as the evening weather forecast. Prediction accuracy costs money too and the level of accuracy demanded to locate satellites in optimal trajectories around the globe are not the goal of a project estimate. The funding for that sort of prediction would likely blow many project budgets alone.

Correspondingly, budgets are based on predictions or professional bets! So we are correct to wonder why budgets harbour such importance to us. Why are budgets taken as such an essential measure of the success of our endeavours and why is there this omnipresent concern that a budget may be exceeded or blown? It is a guess and this guess is represented in a number. But this number harbours such grief and worry. Why is this?

It is not of course the number that is the cause of the concern. It is because this number called the budget represents and measures something very important to us: project success.

This is why we have such concern and the reasons for this are simple also.
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