Planning your budget
Your budget is a crucial component of your business case. Setting an unrealistic budget can mean your project fails, is ill fitting or inefficient. You need to ensure you manage your costs carefully.
Building is expensive. The sums of money involved are often of a different order of magnitude from those that people are used to dealing with in the day-to-day running of an organisation. Clients are often surprised by how little money is left for construction once they deduct VAT - where applicable - consultants’ fees, fees for planning and building control applications and allowances for inflation from the overall project budget.
By managing costs carefully you can make sure you don’t burden your organisation with excessive costs ‘in use’, that is, management, maintenance and – perhaps eventually – disposal costs.
The financial constraints may change during a project – make sure you and your project team keep on top of the finances at all stages of design development.
Once you have understood your financial constraints, your business needs, your capital and revenue costs, and your life cycle costs, then you know your project is viable and you can proceed to plan your budget.
How do I plan my budget?
- Set an outline budget
Use the best available advice to set a realistic project budget.
- Use cost benchmarks to establish initial costings
Develop your outline budget using comparable information from other projects.
- Take account of variables
Set up a contingency budget so that you are prepared for unforeseen extra costs.
- Understand the implications of capital costs
Consider how your organisation will need to be managed before, during and after construction, and the extra costs.
Examples of planning your budget
- You have sought expert advice to develop an outline budget.
- You understand how the costs of your project compare to others.
- You understand the additional management and cost implications for your organisation of your project.
- You have set up a contingency budget.