2(d) Budgeting

Figure 1. Many projects will require that you budget money for resources to carry it out (CC0).

Your project may need some money or other resources to make it work. Especially if you scale your project after a successful action, money and resources will certainly be involved. But even in the project development, you may need to buy materials to make a prototype, or have something printed professionally. Or you may need to pay someone to provide you a service.

In any case, you always need to consider what resources you need in your project plan and for scaling, and determine whether the resources will cost money. Budgeting is part of most project planning and scaling processes and is usually included in the concept plans / concept notes you learned about in Module 2(c) and funding requests, which you will learn about in Module 2(e). Budgeting and funding go hand-in-hand.

It is common to use a spreadsheet to make a budget. There is a Budget tool at the end of this section that you can use and adapt as a spreadsheet template for your own project.

A budget spreadsheet will typically include the following information shown in Table 1.

These are the different parts of the budget:

1. Time period - it is important to include a time period for the budget. It may be the case that you are able to include budgets for multiple time periods in which case you can either put them all on the same sheet, or you can add new sheets using the tab systems at the bottom. Be sure to name the time period in each new tab.

2. Categories of costs - you need to break down your costs into groupings as in Table 2. This helps you really think carefully about all the possible expenses, improves transparency, and helps others understand what you are spending money on.

Table 2. Categories of costs for a budget

3. Planned costs, actual costs and calculating variances - Planning your budget is the first step to a successful project in terms of funding. However, you also need to document your actual costs to show your funders how the money was spent. You will also need to analyse your planned vs. actual costs, what businesses call variance analysis. It is very likely that your spending will be different from what you anticipated. It is almost impossible for you to calculate costs exactly, if only because prices change over time.

Variance analysis takes the budget for your project to the next level by helping you stay within your budget limits, as well as providing a learning opportunity for you in the project development process, and potentially providing the evidence you need to justify asking for more funding.

To do a variance analysis, you need to include a column next to your planned costs and revenues that notes the actual costs and revenues for the resources. You will document these actual costs and revenues as your project develops. The template spreadsheet tool below includes this column, plus one further which is called the variance. This is the difference between your planned costs / revenues and your actual costs / revenues.

If this number is positive for the budget, called a favourable variance, it means that you spent less than you planned or earned more revenue than you planned. In the Budget spreadsheet tool below, favourable variances show in green. If this number is negative for the budget, called an adverse variance, it means that you spent more than you planned or earned less revenue than planned. In the Budget spreadsheet tool below, an adverse variance shows in red. You can have variances for revenues, costs, and profits (though revenues and profits may not be a part of all projects). A simple analysis of planned vs. actual costs is shown in Table 3.

In Table 3, the actual costs for budget categories A and C are lower than planned. However, the actual costs of budget category B are higher than planned. As a project manager, you need to be aware of where you are over budget, so that you can look for compensation measures to stay within your budget by project end. In the worst case, where you cannot compensate by spending less elsewhere, you will need to seek additional funding to finance the project. In Table 3, we can see that the adverse variance in category is compensated by favourable variances in categories A and C, so that the total budget is not exceeded. In fact, this project has room to spare in case of other unplanned expenses down the road.

Be careful about using the Budget Template spreadsheet. There are formulas embedded into the spreadsheet that make total calculations for you. If you add more rows or columns, the formatting should remain. However, you should check the calculations periodically to ensure it is still working as it should. It is possible to ‘break’ a spreadsheet.

If you find that your spreadsheet is broken, and you do not know how to adjust the calculations to make it work again, ask a teacher or mentor to help you fix it. Math and science teachers use spreadsheets often, as do those in your school responsible for budgeting. They can be good sources to help you.

Remember that you can also create your own spreadsheet if you want practice doing this on your own, or if you have special requirements in your project that need a different format. Google Sheets is a free spreadsheet maker. Microsoft Excel and Apple Numbers are two other examples.

Don’t forget to document your work. For a reminder about documentation, see Module 1(e).

Ideas for documentation in this section include:

• Budget spreadsheet

Diliff. “File:Eastern Grey Squirrel in St James's Park, London - Nov 2006 Edit.jpg.” Wikipedia, Wikimedia Foundation, 28 Feb. 2016, en.wikipedia.org/wiki/Vigilance_(behavioural_ecology)#/media/File:Eastern_Grey_Squirrel_in_St_James's_Park,_London_-_Nov_2006_edit.jpg.

Images for examples in different contexts source information:

Samoilov, Yuri. “Coronavirus.” Flickr, Yahoo!, 20 Mar. 2020, https://tinyurl.com/ya2ngksd. CC BY 2.0

Webster, Tony. “Plastic Bottles - Waste.” Flickr, Yahoo!, 16 Sept. 2012, www.flickr.com/photos/87296837@N00/7992944072. CC BY 2.0

XoMEoX. “Tree.” Flickr, Yahoo!, 28 May 2017, https://tinyurl.com/y8bw46ns. CC BY 2.0