Planning the Project Budget

Published: 2009-02-01
Last updated: 2022-03-20

Following the project planning process, we continue with planning the project budget, sometimes called project budgeting, in 3 steps.

Project Planning ProcessProject Planning Process

The three steps are: finalizing the resource plan in form of manpower histograms and similar plans for tools and material, deriving the cost plan and determining the plan of how the project gets paid for.

Now, we combine all this information with our project schedule, i.e. network diagram and Gantt chart. To each work package we assign the resources in terms of

  • manpower: how many people, on what level of skills, with which work load
  • material: how much of what kind of stuff
  • tools: which machinery with what characteristics.

The immediate result of assigning resources to all the work packages will be the resource plan which basically shows when we need whom, what material, and what tools. Another result we obtain is the so-called manpower histogram. It focuses on people only: how many people do we need in which area of skills, on what level of skills, and on what level of work load.

Step 8 – Resource Plan

The following diagram shows an example of a manpower histogram of a project in which we need the contribution of electrical engineers. The horizontal line reflects the time line in weeks (of 40 working hours, each; work load: 100%), the vertical line indicates how many engineers are supposed to work on that project in which week, e.g. 40 engineers in weeks 32, 33 and 34.

Manpower HistogramManpower Histogram

We obtain similar diagrams for all other skill areas and levels and even for the tools and machines we need to use.

Step 9 – Cost Plan

If we now only add the information of hourly rates for the people working in our project, for the tools we need, and the cost of material, we immediately get the cost plan for the project. The cost plan shows the accumulated cost or planned cost of the project with reference to the project time line.

Step 10 – Payment Plan

With a finalized cost plan, we know when we need to provide how much money in order to cover those costs. Since we usually have a customer-contractor relationship, coverage of the cost is taken care of by customer’s payment. So, from the accumulated cost plan, we can derive a payment plan. From the customer’s perspective, this payment plan translates into the project financing plan: On basis of the payment plan, the customer is able to determine the overall project budget, and what portions of that budget are needed at what time to fulfill the payment plan.

Project Cost and Payment PlanProject Cost and Payment Plan

In case the project is about developing, manufacturing, and selling a product, the situation is similar: then, we usually need a sales plan instead of the payment plan.

If the project is company or organization internal, then we could interpret the situation as being an informal customer-contractor relationship. I.e., the informal customer could be the CEO of that company or organization, and the informal contractor’s role could be plaid by one special department.

35+ templates, tools, and checklists in one set

To save you time in your daily work as a project manager, I packaged more than 35 project management templates, tools, and checklists into one zip file.

  • You un-zip it, and you get all items in formats you can edit to your requirements.
  • They strictly contain only standard functionality and no macros or other code.
  • You are allowed to use your logo.
Templates & Checklists for Implementation and Closure Phase
for only
or click here for more info.

Traditional PM
Learning Path Navigation

Related topics

  • Risk Analysis Explained

    In this sub-section, we present some basic ideas of risk analysis.

  • Project Risk Management

    In this sub-section, we explore some risk management and risk assessment details.

  • Assigning Resources

    In this sub-section we describe the transition from planning the project schedule to planning the project budget, i.e. assigning resources.

  • Critical Path

    In this sub-section, we describe how we can analyze the critical path of a project.

  • Planning the Project Schedule

    In this sub-section we describe how we are going to plan the project schedule.

  • Effort Estimation

    In this sub-section we describe the transition from planning the project scope to planning the project schedule, i.e. effort estimation.

  • Planning the Project Scope

    In this sub-section we explain how to plan the project scope.

  • Project Planning

    In this section, we describe the project planning process that prepares implementation and closure.

Return to Project Planning

Return from Planning the Project Budget to Home Page

Your Comments

Have your say about what you just read! Leave me a comment in the box below.
Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.