Forecasting a budget

SixPapaCharlie

SixPapaCharlie

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Working a project that has a 200k budget for 2 remaining months.
The average spend on the project over the last 6 months was 40k per month

When forecasting, is it more commonly acceptable to forecast based on the prorated remaining budget? Or forecast based on historical spend.

In the above example if I forecast the next two months using the prorated $200k, then my next 2 months is foretasted at 100k per month

If I base it on historical spend, the forecast for the next 2 months is $80k <-- this makes more sense to me.

The second scenario is more real world because it is based on historical actual spend. My company has been doing it the first way and our numbers always zero out (duh) and we are surprised by a financial surplus at the end of the project.
 
It all depends on the "value" of work that you've already done. With the 40k/month that you spent, did you do more or less work each month than you'd expected to do for 40k? Given that you're coming in with a financial surplus most times it sounds to me like your productivity is higher than you're forecasting.

What I'd do is compare the amount you expected to spend to complete the work already done, with what you've actually spent. Making up some numbers, let's say you planned to spend 120k so far but have actually spent 80k to do the same work, that means your productivity is 1.5. Now, take your prediction of how many hours you originally forecasted to complete the remaining work, and divide by productivity (1.5). That should give you your best forecast.
 
An engineer would say: I've been spending 40K/month and I don't anticipate any additional end-of-project expenses so my forecast is 40K/month

An MBA would say: I've got 200k remaining in the budget and I have to spend my budget or they won't approve the next one. Forecast it at 100K/month and find ways to spend the money on "necessary" things.

A drone would say: My boss yelled at me last time for not forecasting that my budget will be spent so forecast 100K/month and let the accountants figure it out because no one pays attention to them anyway.

A Cirrus pilot would say: I'm gonna pull the chute
 
Sounds like you're talking about costing. You should use the historical cost rate. If you need to talk about claiming revenue too, the revenue side answer is "it depends".

Your cost answer is 80k. You can adjust that, just justify why.
 
I've never put together a project budget that didn't have real-world numbers. If I expected to spend $200K over the next two months I'd put $200K. Don't get me wrong, I always include margins. But why or how could you submit a plan with any other numbers than what you're expecting?

It's hard to say in your case, because in IT the vast majority of the work never seems to get done until the project completion date looms. Maybe you'll need the full $200K. But if you're on track to only spend $40K each of the next two months...
 
You should have structured the contract to profit share any savings. Win win.
 
fkng PMs. a typical end-of-project conversation I've heard several times:

1) "uh, we have extra money in the budget, does anyone know what we can spend money on?" .......uh, yeah, you can pay the freakin people busting their arses to get the work done on time and on budget. OR, I can punch u in the face and freakin donate the money for all I care.

or

2) you guys went over budget, the project is going red status.

either way, fk PMs.
 
eman1200 said:
fkng PMs. a typical end-of-project conversation I've heard several times:

1) "uh, we have extra money in the budget, does anyone know what we can spend money on?" .......uh, yeah, you can pay the freakin people busting their arses to get the work done on time and on budget. OR, I can punch u in the face and freakin donate the money for all I care.

or

2) you guys went over budget, the project is going red status.

either way, fk PMs.
Click to expand...

You should try working with a PM that's actually competent.
 
I'm sure the fact that I do this stuff for a living will be lost in this audience, but I'll add it anyway.

The forecast for is what you expect to spend. You can express it in hours and materials and multiply to dollars.

How the forecast impacts a budget is a very different thing.

EX: budget $100
actual spend to date - $51

we thus have $49 of remaining budget. right?

Forecasting remaining work may add up to $65 (so we're projecting $16 OVER budget) or it could add up to $35 (so we're $14 UNDER budget)

someone in the thread commented on spending the remaining budget. I see that in Department budgets quite often, but not usually in project budgets. The abuse in project management budgets is usually a PM transferring costs to their projects appear to be "on-budget" to hide the over-runs in the others. It's a beautiful folly since the lesson is never really learned and they eventually run out of rug to sweep the trash under.

Soap box dismounted.
 
Forecasting based on spend rate is the "right" answer but you also have to consider the context and the culture of the organization.

For example, if your troops' supervisors and managers are aware of the budget they might well decide to burn off anything that looks like extra. For example, I once had a good customer call me and say "Send me an invoice for $10K. I'll tell you later what it's for." End of year, underspent budget, gotta burn it off. I sent the invoice, of course.

Countervailing, if you have good control of spending and a tracking system that is close to real time, you may be able to control the spending and keep it at the historical rate.

The principle of "Underpromise, Overdeliver" might make you inclined to forecast spending a little more than the historical rate, then deliver the finished project under your forecast.

So ... lots of non-financial aspects to consider when forecasting.
 
Plan for $200k, spend $80k, embezzle the difference.

Pull the chute to cover your tracks.

:rofl:
 
Depends, how is the bonus structure structured?
 
I agree with the MBA point above, especially if your company is known to slash budgets.
 
Our developers are 100% outsourced 3rd party and we do Fixed bid or Not to exceed contracts.

As such no bonuses. They are the equivalent of contractors building a house.
I don't like the system but not my call.


As far as money left over. Last year I was $889k under budget on the 1st half of the project I am working on. One would have assumed that that money would roll to 2016 since the budget was based on the end to end project but once the upper level big swinging d**ks saw we were under budget, they took that money back out. I am seriously pizzed about that.

I much prefer being the dev mgr versus the PM but ya gotta pay the bills.
I hate that anytime there is a bug, I have to pitched it several vendors and get an SOW.

I prefer just being able to say "Hey, Paul, go fix that query".
 
Oh and gag me, I just got my Safe (Scaled Agile Cert.) AKA Micromanagement via the process vs actual managers.

Either way... More letters on the resume.

This is the modern day war cry in corporate America. Drink the Kool-Aid!!! Can't believe anyone can get work done any other way LOL

SAFe-Big-Pic-2.5-820-x-5941.png
 
SixPapaCharlie said:
Oh and gag me, I just got my Safe (Scaled Agile Cert.) AKA Micromanagement via the process vs actual managers.

Either way... More letters on the resume.

This is the modern day war cry in corporate America. Drink the Kool-Aid!!! Can't believe anyone can get work done any other way LOL

SAFe-Big-Pic-2.5-820-x-5941.png
Click to expand...
The word devops needs to burn.

Also, is your budget consumption going to double the next couple months? If not, sounds like somebody got lazy and just said (remaining)/(months left) = forecast
 
SixPapaCharlie said:
Oh and gag me, I just got my Safe (Scaled Agile Cert.) AKA Micromanagement via the process vs actual managers.

Either way... More letters on the resume.

This is the modern day war cry in corporate America. Drink the Kool-Aid!!! Can't believe anyone can get work done any other way LOL

SAFe-Big-Pic-2.5-820-x-5941.png
Click to expand...


It's the most awesome way I've ever seen for groups of people to shun all personal responsibility for anything that happens in software development.
 
denverpilot said:
It's the most awesome way I've ever seen for groups of people to shun all personal responsibility for anything that happens in software development.
Click to expand...


But don't forget there is a check mark in a Q that says "Code quality".
It's like its guaranteed
 
As a PM in Oil and Gas, any time I see a chart that looks like that I want to give the creator a good slapping.
 
rpadula said:
Plan for $200k, spend $80k, embezzle the difference.

Pull the chute to cover your tracks.

:rofl:
Click to expand...

I'm not risking jail time for $120k. $120M might be a different story, but I could probably hire quite the legal team if I had that kind of money. I might even get to keep a lot of it. ;-)
 
So wait. Let's see what we're really talkin' about here...

We have a nice work of fiction, known as a "budget", that we want to "forecast", more fiction, and we're debating the best inaccurate way to do that.

Hahah. Got it.
 
Although your historical is $40k usually implementation costs run a little higher at the close of a project. It's like using run rate to predict annualized sales. If you don't think your closing implementation costs will be higher or you're not involved in implementation then just use the $40k and build in a little margin just in case..
 
SixPapaCharlie said:
Oh and gag me, I just got my Safe (Scaled Agile Cert.) AKA Micromanagement via the process vs actual managers.

Either way... More letters on the resume.

This is the modern day war cry in corporate America. Drink the Kool-Aid!!! Can't believe anyone can get work done any other way LOL
Click to expand...

Um, wait, where is the UX team in that hodgepodge?
 
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