Particularly in the case of an innovative project it is difficult to assess the total amount of resources (own and external resources) needed in order to implement the planned approach. During the general planning phase it is often impossible to draw up a detailed and correct budget. However, starting from the requirements which are determined by the project objectives and the planned approach, a first estimate of income and expenditure can be made.
When a project proposal is made, the financial backers usually demand an overview of expected costs, an indication of the contribution made to the project by the executing institution and – if applicable – contributions that might have been granted by other donors.
Receipts
In discussions with the execution institution (and key-persons from other organizations: see 'Fundraising') the total amount of the financial contribution that can be expected should be discussed first.
Although generally not (yet) the case for prevention and health promotion projects it is possible to generate income during the course of a project (e.g. by selling products or services).
Costs
The principal costs of a project are salaries, running costs and material costs.
In order to calculate salaries accurately you need to know the time that is needed to implement the planned measures. The way work is distributed is important -not just the volume of work. A large project team provides a large spectrum of know-how and experience but the time spent on coordination, team development and the resolution of possible conflicts is also greater. The effort you have to put into these matters is not directly linked to the intervention itself. Normally, personnel resources are distributed uniformly over the whole duration of the project, which almost inevitably leads to temporary under or over utilization of skills and capacities. From this point of view it is useful to divide the project into distinct phases and plan personnel according to the needs of each stage.
When estimating the operating and material costs, it must be discussed with the executing institution if a charge is made for the use of some of its resources (see 'Infrastructure').
It is usually not up to you to decide how and in what way you itemize your budget. Your institution probably uses an accounts code and potential funding agents or backers will also prescribe how the budget should be presented to them.
Revision and adjustments
If you are in the happy situation of having secured the total financing of your project and all required funds both from your own institution and third party equity have been pledged in a binding way (see 'Budget') you can start to define the project objectives more precisely (see 'Formulating objectives' and 'SMART objectives') and start the detailed planning of the first project phase (see 'Setting Milestones').
However, it is more likely that only a part of your budget has been secured. This therefore leaves you with two possibilities: either you try to raise more third party capital (see 'Fundraising') or you rescale your project. In the latter case you have to redefine your project objectives and the planned approach in terms of expenditure and effectiveness has to re-thought.
When reworking the budget, you must also make adjustments in terms of objectives and procedures. Changes in your detailed planning should automatically induce changes in your budget. In your institution there will possibly be an accounts plan that must be used for the itemization of the different budget items. The routine use of a consistent accounts plan is a prerequisite for controlling (see 'Controlling') and will ultimately allow you to compare different projects in terms of cost and benefit.
Personnel costs
In order to calculate the costs in personnel for both the project leader(s) and the team members - often the biggest cost factor in an intervention project - it is necessary to create a detailed time allocation budget (see 'Budgeting'). It is possible to establish this quite accurately, because by now you will have a clear and detailed vision of your approach and the measures you wish to implement. The qualifications of the team members, should they already have been recruited, the allocated working time and the tasks to be accomplished must all be in a realistic relationship in order to minimize the risk of over- or under-employment.
Depending on the intended structure of the project team it might make sense to delegate tasks which require specific qualifications to third parties. Before budgeting for such external expertise you may need to ask for quotes.
A realistic and detailed breakdown of the estimated cost of operations and materials implies that the use of the infrastructure and other resources of your institution have been clearly discussed (see 'Infrastructure')
- Your first concern is to create or maintain jobs in your institution.
- You do not know how to draw up a budget nor are you familiar with account codes.
- You think that a rough estimate of the required funds is enough for a project plan.
- You have already created a potential budget that takes into account some of the expected restrictions.
- You are not familiar with accounting, and as such it does not make any sense to you to invest time in budgeting.
- You are satisfied that you and your team members are under a contractual work agreement over the next period of time. You are satisfied that you are not responsible for any loss in the end.
- You have no idea how much time will be needed to accomplish the scheduled tasks and thus cannot create a detailed time budget.
- You cannot draw from the experience of previous projects since you believe you have developed a new approach.
It is easier to justify your demands for funding if the budget has been prepared in a realistic and detailed way. It is easier to avoid over- or underestimation of costs if you do not calculate your costs for personnel as a percentage of full employment but in terms of the time needed to accomplish each task.
Harmonising project objectives and procedures with the budget is not an easy task. Preparing the budget carefully, taking into account experiences gained from previous projects, will result in a balanced profit and loss analysis. You will have neither financial nor personnel bottlenecks nor will you be responsible for surplus funds in the end. Based on a detailed budget you are in a position to analyse the cost and benefit of specific tasks which can then be used in terms of project management.
It frequently happens that project leaders have to adapt the project objectives and the methodological approach to the budget because they had miscalculated the time and resources needed for the project (financial and in terms of personnel). The checklist 'Budget' lists a certain number of points to remember when drawing up a budget.
It is worthwhile consulting and comparing budgets and final accounts of previous projects. This is particularly useful for the calculation of operating and material costs.
Submit your budget to people who have experience in this field.
It is often difficult to estimate the time and the cost in personnel. Work protocols with detailed timesheets from previous projects are an invaluable help when estimating the time necessary for each task (see 'Controlling').
Fine-tune the budget that was created during the general planning phase. Harmonize it with the redefined project objectives and with your planned approach by preparing a detailed time budget of all expected activities. Be guided by budget statements from previous projects and ask an experienced specialist to verify the budget along with an overview of all project objectives and all planned activities.
- Do you have a detailed time budget for all planned activities?
- Is the budget based on the real requirements of the project, i.e. according to the stated objectives and methods?
- Is all income and expenditure listed fully and in detail?
- Is the project budget sufficiently detailed in order to be useful for managing the project?
- Have experiences from other projects (final accounts, timesheets) been taken into account?
Project planning
