Five methods to cement your project budget

In this series on budgeting, we collect expert advice on how you can plan, manage and balance your budgets to make sure that your finances are in great shape throughout the duration of any project on which you are working.

First in the series we discuss the idea of a budget in brief, and then show tried and tested methods to help you with planning. Finally we suggest some unaffiliated further reading for those who wish to delve a little deeper.

Budget: Etymologically derived from the old French word bougette, meaning purse, generally speaking a budget is a financial plan devised to cover an approaching financial period.

Property developers, financial intermediaries and private individuals planning a self-build - anyone can benefit from a nudge toward better ways of planning a budget. So whether this is new to you, or it is simply a refresher, you will find practical advice to manage the finance of your project.

The five methods

Method one:

Make a record of the core costs for the project. This includes both direct and indirect costs that you expect to run into. Direct costs include things like labour cost, materials and any travel that you expect to happen over the duration of project.

Method two:

Prepare changeable budget estimates. The nature of any project is that prices fluctuate up and down depending on the context of the situation – working to a tight deadline? Then expect the price of hiring any subcontractors to be representative of the timeframe within which you are working: the tighter the timeframe, generally speaking, the higher the cost.

Method three:

Involve everybody who needs to see the budget and be transparent. The most professional attitude to have toward your budget is one of total limpidity. Trying to hide or skew the figures might get you approval faster, but risks permanent damage to your credibility when huge problems occur in your budget. If you are working independently, be honest to yourself; and if you are working with clients, be open to them about the budget.

Method four:

Manage scope. While budget overruns are expected, many extra costs are avoided if you manage the scope efficiently. Change orders, which allow contractors to secure additional funds for extra work, can be useful to make sure you stay in budget. Bridging loans and short-term finance can also help to surmount any obstacles that get in the way of a project's completion.

Whether you are funding a project yourself, or relying on funding from a third party, make sure you have recourse to extra funds to prevent any costly surprises from stopping the project in its tracks.

Method five:

Look into the available apps to use for budget planning and forecasting. For example, Business Insider has published a great article which shows several great apps you can use for budgeting. The article focuses on personal finance, but many of the apps could just as easily be used to monitor a project.

Planned, but need to manage a budget?

You are aware of the costs, you have prepared changeable budget estimates, you have involved everyone along the way, you are aware of the scope and you have obtained useful applications which can help you to plan your own project. You are well on the way to a successful, solid-as-cement budget plan.

Next and as the project continues you will need to be confident with managing the budget, which we will cover in the next part of this series.

Affirmative is a bridging finance lender that helps property developers, property investors, and individuals with big dreams to secure short-term finance fast. Speak with us about a bridging loan on 08000 44 84 84 or send an email to enquiries@afff.co.uk.

Recommended literature

Affirmative strongly recommends gaining professional insight into budget management, of which the following books are strong examples:

Nigel Wyatt, The Financial Times Essential Guide to Budgeting and Forecasting: How to Deliver Accurate Numbers, 2012.

Malcolm Secrett, Brilliant Budgets and Forecasts: Your Practical Guide to Preparing and Presenting Financial Information, 2010.

Steven M. Bragg, Budgeting: A Comprehensive Guide, 2013.