Have Your Budget Under Control!
Budget is the driving force of every company and that’s why you should have budget control indicators. They will help you keep financial stability and make your company successful.
Budget sets various boundaries for your company. If it’s large, you have a wide scope of perspectives. You can invest it, make it bigger, implement changes. But when it’s limited, your possibilities are also limited. No matter the case, you need to know how to control your budget to make smart decisions, not to exceed it when it’s tight and not to lose it by unreasonable, reckless actions.
Here you’ll find 5 budget control indicators you should use to always stay on top of your work!
👉 Check here top project management metrics.
1. KPI
KPIs are probably the most important budget control indicators. Klpifolio defines KPI (Key Performance Indicator) as
“a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use key performance indicators at multiple levels to evaluate their success at reaching targets.”
And KPIs can focus on various aspects involving budget. Since they’re very important, you should never forget about them. You can either define your own indicators or use these already existing which are used by experts. Take a look at those presented by Moira Alexander, a project management professional:
- Actual cost (AC), aka actual cost of work performed (ACWP), shows how much money has been spent on a project to date.
- Cost variance (CV) indicates whether the estimated project cost is above or below the set baseline.
- Earned value (EV), aka budgeted cost of work performed (BCWP), shows the approved budget for performed project activities up to a particular time.
- Planned value (PV), aka budgeted cost of work scheduled (BCWS), is the estimated cost for project activities planned/scheduled as of reporting date.
- Return on investment (ROI) shows a project’s profitability and whether the benefits have exceeded the costs.
Read more about avoiding cost overrun.
2.Budget vs. actuals vs. forecast
“Budgeting is the process of creating a plan to spend your money.” What is income and what are expenses? How much money can be spent, and how much money will you earn?
But you also have to include actuals and forecast. Actuals mean calculating fixed and variable costs, general income and loses. Forecasts, on the other hand, allow you to calculate future expenses and create your budget plan in advance.
These budget control indicators will help you stay on top of things and keep balance in financial issues.
3. Fixed vs. variable cost ratio
Nobody likes surprises, especially when it comes to money. And that’s why you should pay attention to fixed cost and variable cost ratio, unless you like surprises.
Fixed costs include all such things as salaries, utilities and equipment, taxes, etc. Things you pay on a regular basis. Things in the budget you don’t have to worry about too much. Either way, it’s always easy to forecast them. Yet when it comes to variable costs, it’s not always that easy. Such costs include clothes, travel expenses, fees and other. Those are usually unexpected, especially if you don’t plan them in advance.
It’s a good idea to always have some room for the unpredicted budget. That way you will never get surprised.
4. Tick-tack
Time is money. And so time is an asset, but not only. It is also one of the greatest budget control indicators ever invented. Why? Because it allows you to fully control your budget in a special app:
- You can track time against the budget,
- Forecast future project budgets,
- Easily manage and control payroll,
- Create invoices based on tracked hours. It’s not only a quick way to get paid but also to accurately bill your clients.
- You can compare tracked time with the budget and see if you’re on track.
- Whenever you exceed the budget, you get notified.
And you can do it all using TimeCamp, a time tracking software. No more loopholes in your budget. No more inaccurate numbers. Everything under control.
Thus, it is probably one of the best ways to manage and control budget. And if you combine time tracking software with your currently used budget control indicators, you’ll become a billionaire!
Stay on top of your budget. Sign up for TimeCamp to power-up your budget control indicators!
5. Accountability and Information
These are not exactly budget control indicators itself but they’re of great importance. You, as a leader, project manager or a team member are not the person solely responsible for controlling budget.
Budget is one of the most important elements of every project and even an entire organization. While it’s impossible to assign all people to manage and control it, you should appoint a person or several specialists who would be responsible for the money. Including all aspects related to it such as risks involved, forecasting budget, making sure all numbers add up, informing the management about any problems and issues, creating reports, etc.
At the same time, everyone in your organization should know what’s happening with the budget. By that, you will allow your people to have insight. It’ll help them gain a real perspective on what’s happening in their company, they will work better, and will always know what’s happening. That way you’ll help them boost their efficacy.
How Are Your Budget Control Indicators?
It’s best to use those budget control indicators that fit best to your organization’s culture and business model. You can freely adjust and change them. Be moderate and don’t bend them too much even if it seems like your budget doesn’t have an end. It is a very fragile thing and it’s very easy to lose it. Always be careful and think twice before making up your mind.