Manage Your Project Budget Like a Pro

To be able to control a budget you first to identify the real or true costs of ERP. Think about hardware and software costs, staff training, organisational change management, ad-hoc developments, external consultancy fees and any additional staffing requirements (including backfill). If you are using an ERP consultancy they will provide you with a scope of services and software/hardware budget, but remember this will not be the whole budget. The first thing you need to know is what is not included; as these soon add up. Brainstorm this and try to leverage the experience of others who may have been through the process previously. Factor in as much as you can before you begin.

Certain elements can be difficult to define because the breath varies greatly project to project and business to business. However, almost all projects involve data migration, backfill and some form of modification to third-party software. Also consider any other third-party software costs, or non-related ERP software costs, and any freelance consultant costs you may need along the life of the programme.

“A budget document is an evolving document as the project progresses and the estimates are known in greater detail.”

Once you have a budget, you need to control it. This means continually monitoring and reviewing, so it is absolutely critical to identify milestones and targets. Actively managing your budget is the only way to ensure it is on track and there will be no surprises – a sure way to irritate stakeholders and board members. Any significant overspend will almost inevitably jeopardise the completion of the programme.

There are lots of ways to construct a budget. You can use anything from high-end accounting software to a simple Microsoft Excel spreadsheet. Whichever option you decide on, it is only ever going to be as good as the information you put into it. All the widgets and colour coding in the world are worth nothing if you have not done your sums and thought about every little cost.

Spending wisely

Many companies find that ERP implementation cost twice as much originally planned. Indeed, it can be very easy to overspend an ERP budget. However, apart from a significant increase in scope, assuming you are working to a reasonable budget that is been carefully put together in the planning stages, there is no reason why you would not be able to complete things on time and within budget.

Here are a few tips for staying within budget:

• Avoid unnecessary expenses. If you are regularly spending significantly on items that can be cut (catering etc.) you will soon eat into your budget. Suggest post-lunch meetings and be frugal with voluntary expenses
• Set up a monthly cash flow. Your implementation plan is going to consist of hundreds of tasks that can be categorised into “essentials” and “desirables”. If the seventy-five percent of your budget covers all your essentials, you are on the right tracks
• Treat the business’ money as if it is your own. It is tempting to get carried away but frugal is always best. If you treat company money with respect and concentrate on the essentials rather than all the bells and whistles, you are far more likely to complete within budget
• Use your resources wisely. Monthly spending is often eaten up by people, so one of the easiest ways to adjust costs is to reduce the number of consultants and recruit staff members with a strong skills base. Broadly speaking you will be able to pay two or three internal people for every consultant
• Expect the unexpected. All good project managers and budget controllers leave a little bit over for last minute emergencies. More often than not, you will come across some unexpected problems along the way
• Do not get caught out and make sure you have a contingency plan

Budget Checklist

• Have you cost your programme fully?
• Have you applied an appropriate contingency to the finances?
• Have got various budget controlling mechanisms in place?
• Have you developed a projected forecast for the programme?
• Do you understand the cost to complete?

This chapter was taken from our publication ‘8 steps to a successful ERP’.

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