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Managing a budget and costs is critical for the success of a project. The first step in effective budget management is the estimation of the costs involved in order to complete a project. The budget for a project can be set ina number of ways, most common are - Top down budgeting - When a budget is set for the project manager, often based on financial constraints, and the project manager must find a way to fulfil the project with in the budget. Bottom up budgeting– when a project manager is asked to submit a cost for a project based on the project scope. Whether you have been given a budget, or you have to submit one, there are a number of strategies you could employ when compiling an estimated cost for a new project. Expert Judgement – you can use your expert judgement or experience to estimate the cost of a project. This method can be useful experts often take account of factors that inexperienced project managers may not consider. This approach can be good for a rule of thumb indicator, however a more complex analysis is required when producing detailed budgets. It is also advised that the judgement is based on current costs or market conditions, as prices can fluctuate and basing on expert judgement could prove dangerous if price hikes are not considered. Replication – Using old projects to create an estimate for the new. This method can be time saving, and as long as you consider and account for the differences between the two projects it can be a good way to estimate. This method benefits from experience and helps new projects to include previously overlooked aspects. Supplier Quotations – you could use the costs from a number of suppliers to come to an average costing base from which to work from. This process can take more time as you have to brief the project to a number of suppliers, and ensure you are comparing like for like bids, however benefits can be gained by more people considering the project which could result in a more innovative solution. Find the middle ground – Using the best case, most likely case and worst case scenarios to build a picture and produce a weighted average. Monitoring the Budget Once a budget has been agreed and costs estimated, the nest stage is to monitor the reality against the plan. Use the plan as a reference when supplier quotes come in and use the costs that best match both the project requirements and the estimated costs, in order to keep the project on track for completion within scope and budget. Return