While routine business operations keep your business functioning, projects are what propel and advance your company. From integrating new technology systems to marketing research, projects are used in almost every area of your business. Some projects may be limited in scope, but large projects can require dedicated employees, time and a budget. Sticking to a budget is essential to help ensure the project contributes to your long-term business goals.
Projects that go over budget can affect your financial stability. Increased prices, employee overtime and poor initial cost estimates can cause projects to take more time and money than initially planned. While some of the capital costs of large projects can be spread out over time and may be financed through loans, the immediate costs of labor and supplies usually requires dipping into your available cash. Withdrawing funds from your bank account can affect your immediate liquidity, your cash flow and your ability to pay for other business expenses such as utilities and employee salaries.
Going over a project’s budget can affect the reputation of your overall business, project managers and executive leadership. Public companies can face increased scrutiny from current investors, analysts and potential investors if publicized projects are not done on time and to budget. Private companies can still face negative backlash from partner companies, private investors and customers. Being able to accurately project a budget and stick to the original financial constraints is viewed as prudent management.
Projects performed for clients that go over budget can affect your company’s profits. If the project is performed on a contract basis, you are likely held to many of the initial cost estimates you provided to gain the work. Your business may have to absorb any cost overages, which will lessen your profit. If the project goes too far over the initial budget, your company may lose money on the job. Even if your project is not contract-based, going over budget can strain relationships with your clients and business partners if it cuts into their profit margins.
When your business projects run over budget or schedule, it can affect productivity. Employees who were scheduled to work on other projects can be delayed, needed supplies can be unavailable and the additional funds need to finish the project can leave less funds for other projects or business functions. Additionally, the “blame game” that can occur to justify project costs takes time and increases the frustration level of project participants.
Family Budget Project
When it comes to budgeting, sometimes it feels like one or both parents wind up being the bad guy. Other family members...
How Copyright Affects the Business
Copyright is part of a category of legal protection called intellectual property rights that aims to protect ideas. Copyright confers some legal...
How to Manage My Construction Project
You can save money by managing your own construction project. In doing so, you’ll be taking on the role of a general...
How to Develop a Project Budget
Regardless of whether you are organizing a project for work or planning a personal project to undertake in your spare time, chances...
How to Know if you are a SHOPAHOLIC
Being a shopaholic is often thought of as something to joke about; however, for too many it is no laughing matter. A...
Why Businesses Need to Budget
Running a business requires a great deal of financial acumen, and one of the most important components of business management is budgeting....
What Is a Project Budget?
Before any project begins, the project manager might face the largest challenge of anyone on the team, determining the project's budget. She...
The Main Reasons for a Budget
A budget is a financial plan that helps individuals, groups or companies. Some people prepare a budget with a pen and paper,...