Why is project budget tracking important for small business?
Every business has to set separate budgets for all their different departments, and the teams utilize these funds for their daily business expenses. There will be instances where a separate budget will have to be assigned for one-time projects. These project budgets are usually not fixed amounts and highly depend on the type of work that must be done.
Regardless of whether you’re a small business that sells a product or one that provides a service to clients, you will need project budget tracking systems in place to ensure that all the funds are being spent as planned.
A project budget is a specific amount of money that is set aside for the completion of a project. It is usually not a recurring cost but rather one that is planned and estimated based on the situation at hand.
Creating and setting a budget for specific projects is not only important to forecast future expenses that are going to occur, but also give the project itself a sense of direction. While estimating the funds is a crucial task, the other half of a successful project from a logistical point of view is project spend tracking.
Monitoring when, where, by whom, and how the money is being spent can help businesses plan similar projects in the future. But before we dive into how to track budgets, let’s look at what makes a good budget.
The process of planning and formulating any kind of budget looks quite similar - Understand the scope of work, figure out the resources needed for execution, estimate costs, plan out timelines and budget allotment, get approval, and finally track how the money is being spent.
Before you can even think about the money required to execute a project, you should focus on what the project entails. The scope of the project should be clearly defined to understand what is the work that needs to be done.
So, for example, if you’re a business planning to launch a new product in a new market, understand what are all the tasks that would need to be executed from an operational and a marketing point of view to have a successful launch.
Similarly, if you’re a small digital agency and you have a potential performance marketing project, you’ll need to understand the scope and scale of advertisements to run, based on which a budget will be drafted.
Once clarity is gained on the scope of work, only then will you be able to figure out the resources you need to execute the project.
There is a time, effort, and energy commitment that needs to take place with different resources, be it human talent and their skills or physical/digital tools. All of this will also determine the project budget.
The next step that follows once you figure out all resources that are required is to estimate how much each of them will cost.
While there’ll be certain elements whose price you will know exactly, there will be other things that do not come with a standard cost. This could be anything from getting the help of a freelancer, service providers for tools and equipment, individual contractors, etc.
Getting approval will be easy as long as you know you are doing. If the budget planning for your project has been done with realistic expectations and backed through some kind of data, chances are that it will be accurate to a certain degree and the final budget utilized will be similar to what was forecasted.
The final aspect to set up before you start your project is to figure out how project expense tracking will be done. Tracking gives you visibility daily - Are actual expenses matching up with the expectations set during the budget planning phase or not? It also helps in monitoring if overspending is taking place for certain tasks.
While traditional project budget tracking is done using excel sheets or other software, it is a manual and tedious process to constantly coordinate with stakeholders and check how much has been spent and on what.
It’s a no-brainer that when manual work is involved, there is a lot of room for making mistakes. To avoid this, modern businesses opt for spend management software that is already integrated with cost tracking tools.
When you’re opting for such a solution, it is important to ensure that it meets your business and project requirements. Here are some features to look for in the spend management tool:
The expense management tool that you select should have a consolidated dashboard that shows you all the important details at a glance. The major benefit of being able to track expenses is project budget monitoring. Only when you can keep a check on the budget can you make tweaks and adjustments to spend the budget optimally.
The dashboard should let you see how much of the budget is spent, how much is left, what amount has been spent on different aspects, and who is responsible for each expense.
The whole point of choosing a spend management tool that can automatically track project expenses is to avoid manual entry and the scope for error that comes with it. But how do you achieve this? The answer is corporate credit cards that are integrated with the expense management system.
Normally, the project stakeholders would use a single credit card to carry out expenses, which would have to be manually tracked and recorded by the project manager or responsible person in an excel sheet. But with corporate credit cards that are directly linked to the expense tracking software, each transaction made by a project member gets automatically recorded on the dashboard.
And since with Volopay you can issue a physical card for every employee and unlimited virtual cards, you’ll also know who is spending rather than just how much is being spent on something.
While we’re on the topic of cards, you might be wondering that it is quite risky to give each project member a credit card as there is a chance that someone might end up spending more than what is required.
To curb this problem, as the admin on our software you can set a limit to each card on how much it can spend from the assigned budget. So there’s no chance of overspending. If the need arises for a member to spend more than what was planned, you can always go to the dashboard and adjust the limitations.
Another way to track project budgets and monitor expenses is by setting approval workflows before a purchase can even occur. What this means is that if your team wants to carry out an expense of $500, a notification is sent to the project manager on their dashboard to approve the request to spend this amount.
The approver can view who is requesting the amount and for what kind of expense. You can also add multiple levels of approval where more than one person has to approve the transaction. This is another way to control and ensure that your project budget is being spent judiciously.
No more does a project coordinator have to sit at the end of every day or week and record expenses manually. Since each transaction is recorded immediately on the spend management tool, you get real-time visibility and the ability to control and be agile with budget changes.
If a client or a major stakeholder would like to see a report or an overview of how their budget is being spent, it is extremely easy to export the data in shareable formats and create reports.
The whole software ecosystem reduces the paperwork and files to be handled. All receipts of expenses can be attached as images directly to their corresponding expenses on the system.
Using the different ways in which you can limit the spending of an individual through the expense management system, you also end up reducing the possibility of any fraudulent activity.
Having one control center with integrated cost tracking tools for the entire budget makes it easy for the project manager to distribute and assign money to employees and spend on the necessary resources.
Since every transaction in budget tracking for project management is being recorded digitally, the reports generated can also be customized through specific filters such as which employee spent the most, what aspect of the project cost the most, and so on.
The ability to set limits on the corporate credit cards and set up approval workflows does wonders for controlling the project budget.
Project budget tracking becomes easy when you choose to use Volopay’s expense management software. From creating separate budgets, adding members, assigning individual credit cards, setting their spending limits, creating approval workflows, you can do it all. Your project management expense tracking goes from a tedious manual task to an automated process.