Effective budget management drives more successful and profitable projects. Yet, many teams fail to effectively track project expenses because they manage them across disparate systems: POs in accounting software, labor costs in spreadsheets, and miscellaneous project expenses on spend cards.
When project managers consolidate spend data after completing project phases or at project wrap-up, it's often too late — budget overruns are already a done deal.
We’ve talked about this common pitfall and the importance of financial oversight through the entire project lifecycle in other guides— and it’s the reason we built Workamajig with accounting software, real-time budget and profitability tracking, and financial reporting dashboards.
Using project management software with built-in budget tracking (like Workamajig!) is just the first step in improving budget management; you still need strategic cost management procedures to avoid overruns and ensure project profitability.
That's why we've created this guide to budget management best practices. It reviews:
- Popular budgeting methods
- Our tips for managing a project budget
- Strategies for preventing overruns
- Workamajig’s project budget management tools
For more advice on creating a project budget, visit our guide.
Popular Project Budget Estimating Methods
Three-point estimating uses past information to judge the best-case estimate, the most likely estimate, and the worst-case estimate of a project to determine the most likely outcome. Based on this figure, the project budget is then decided.
Analogous estimating uses information from previous, very similar projects to guide the project budget. This method is most effective when limited data is available, but the estimate may not be highly accurate due to its reliance on past projects.
Bottom-up budgeting involves determining the costs of different parts of a project and adding them up to get a total estimated budget.
Top-down budgeting means estimating the project total and dividing that by the number of tasks, allocating an appropriate amount for each task.
Parametric Estimation is a sophisticated budgeting method combining industry data and previous project knowledge to reach a fairly accurate budget.
Workamajig’s Project Cost Management Tips
Calculate & Account for All Project Costs in Real-Time
The first and most important step is to realize and track project expenses in real time as they’re incurred. That means you should be:
Requesting quotes for freelancer or vendor costs when creating project plans and reconciling invoices with work orders as soon as they’re received. You can compare actuals to estimates to catch mismatches immediately and adjust project plans accordingly. (Pro Tip: Use POs as often as possible when purchasing from vendors. These lock vendors into rates so you don’t get hit with surprise invoices.)
Tracking employee hours daily as they complete tasks, and calculating labor costs as employees submit hours. This lets you see if employees can complete work within the budgeted amount of time (and dig into the “why?” in cases where employees run over) and proactively adjust budgets in other areas to compensate for overruns.
Tagging project-related expenses across credit cards or bank accounts. For example, if you’re running social media promotions for clients, you’ll want to check and account for those costs regularly. You should also consider other materials or operational costs here; you may purchase a training session or a new software application to assist with client initiatives, and want to include those costs in project budgets.
Your project plan and estimate should outline all expected project activities, resources, deliverables, and costs. This way, you know what expenses to anticipate, and then you can check actuals to estimates as you realize costs.
If you’re not using a project management system to track real-time project costs, you should be on top of this task daily —even more often for short-term, fast-moving projects. Check invoices, calculate labor expenses, tag other project-related expenses, and then update budgets with the most current costs.
Workamajig assists here with:
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Assign a Specific Person(s) to Manage Budgets
Most often, project managers oversee budgets, but there may be cases in which you need to delegate. Project teams should designate one or two people to monitor and manage budgets, and this role should be clearly assigned and defined so everyone knows who’s steering the ship.
Remember, if you manually manage budgets, you should check them daily (at minimum). If you have a project management tool supporting you, you may only need to check in every couple of days or once a week.
Some systems, like Workamajig, will also send alerts about projects at risk of overruns so you know which projects require attention and when to step in.
Plan Cost Thresholds
Plan cost thresholds (spend limits) for specific project phases, elements, or resource categories.
Define the point (or dollar amount) at which corrective action is necessary.
Develop specific action plans to course correct when you’re approaching thresholds.
Outlining thresholds lets you be more strategic and proactive in controlling costs, and it avoids some of the frantic guessing games when trying to reconfigure project plans on the fly. Because unexpected costs and overspending are sometimes hard to avoid, you should expect some hiccups along the way and have a plan to roll with the punches.
You can determine appropriate thresholds by looking at past projects and considering your pricing structure.
Let’s consider a branding project: if your team sets a $1,000 budget for logo design, the cost should stay below that threshold.
If your team is approaching this number and the logo is still incomplete — say you’ve spent $750 and aren’t landing on a final design — managers will need to step in and implement action plans to complete the logo without exceeding estimates.
Project management tools with budget trackers will send alerts about projects nearing thresholds so managers or those in charge of project budgets can step in. |
Consider Inflation & Contingencies
You should also add contingencies to estimates as a safeguard against potential uncertainties, disruptions, or unforeseen changes during project execution — especially for more extensive or complex projects that have long timelines.
For example, project materials costs could fluctuate, or software providers could raise subscription costs. Inflation and supply chain bottlenecks are other common culprits for budget overruns. Major world events, natural disasters, and weather changes can also impact project budgets.
You should expect some cost variance; contingencies give you a buffer to preserve profits.
Workamajig's automated estimating tool calculates project budgets as you create plans and allocate resources. It can also include overhead costs and contingencies to ensure accurate, reliable estimates. |
Continuously (Re)Forecast Budgets & Resources
It’s simple: frequent budget oversight prevents a project from getting too out of hand. A project without frequent re-forecasting will likely end in disaster.
As your project budgeting needs consistent forecasting, you should do the same for your resources. After all, your resources are the bread and butter of your projects and contribute to their overall cost.
PMs should constantly re-forecast their resources by reviewing the number of people working on a project at a given time and anticipating the future every week. This will ensure you utilize your current resources and that employees work as efficiently as possible.
Consistent re-forecasting also enables your team to gauge a project's progress and ensures the budget aligns with the expected completion date.
Anticipate & Manage Scope Creep
Any agency that’s been in business for a long time has experienced the horrors of scope creep. The scenario is usually similar: a project with a new client is going well, but over time, it grows bigger and bigger while your price remains the same.
Typically, this results in two outcomes:
The client thinks the extra work your team puts in is included in the original project scope.
The client has no idea they’re asking for more than initially agreed upon.
It’s crucial to monitor scope changes at all times and know that they’re likely to happen to your team at some point.
With that, you must establish a strong change management plan and use change orders to incorporate additional work into project plans and estimates. Change orders prevent budget overruns by authorizing additional funding and covering the costs of extra work.
Read more on scope creep management in our guide.
Regularly Communicate with Project Stakeholders
A project is only as good as its team — and a team with poor communication is sure to go over budget. Keeping your team informed of the project’s budget forecast will help encourage accountability and productivity.
Encourage open communication to promote ownership of the project. If employees care about a project’s outcome, they will produce stellar work.
Debrief After Wins (& Losses) to See What Drove Project Success
Project managers should have a process for reviewing wins and losses from every wrapped project. Analyze what drove profitable successes and understand why struggling projects exceeded budgets or timelines. When exactly did projects go off the rails, and what caused the derailment?
This play-by-play is critical for gathering valuable learnings from every project and campaign. Then, you can approach every new project with greater strategic knowledge and improve future decision-making.
These insights can assist in various areas. For example, they can help you optimize processes, improve cost estimation, adjust thresholds, or revise your plans for correcting projects when approaching thresholds.
Project managers should also communicate these insights to team members so everyone knows the outcomes of the projects they were involved in and are looped into the key takeaways. Then, they can apply these learnings when they work on future projects.
With these tips in mind, we’d like to add one caveat: When it comes to project budgets, there’s a lot of talk about coming in ‘under budget,’ i.e., your project budgeting process is such that you’ll only take on a project if you’re confident you won’t go over budget. You’ll take preventive steps along the way, too. This sounds good, but being over-cautious about a project management budget can cause agencies to lose out in the long run. This can happen if you take on too few projects out of caution when, in reality, you’re coming in far under budget with your other projects and could have easily taken on more. The trick is to find a comfortable middle ground. You exercise caution when agreeing to new projects and closely monitor the budget as the project progresses. Yet, you’re also prepared to take minimal risks that are unlikely to be costly and offer you the opportunity to grow. |
Strategies for Preventing Budget Overruns
Notice climbing project costs? Here’s how to regain control:
Offset expenses by taking the budget from another project area and using it to cover the extra costs.
If possible, reassign upcoming project tasks to team members with a lower hourly cost.
Look for other opportunities where you can reallocate resources to align with budget constraints and project needs.
There are straightforward solutions for #3. For example, you could evaluate vendor contracts and renegotiate terms to secure better pricing for project materials. Or you could switch to vendors with lower rates.
You can also get crafty here. Consider a more complex project where you bring in outside consultants or freelancers to guide certain project phases. In such a case, you could reduce costs by taking an online course or scouring the web for free resources to educate your teams on the topic.
Last but not least — a strong change management plan helps you maintain control of project budgets by providing a way to account for out-of-scope requests.
Change request forms allow project managers to outline changes to project plans and the associated costs. Then, they can send updated plans and estimates to clients for approval and secure additional funding.
Read more:10 Actionable, Practical Tips to Increase Agency Profits (+ FAQs)
Tools for Managing Project Budgets
Another key aspect of managing budgets is determining what tool you will use.
As mentioned earlier, many teams we consult with manage project costs across disparate systems — often using a combination of spreadsheet systems like Excel, time tracking tools, and accounting software.
But this isn’t the best practice because you can’t manage costs in real-time within project workflows, so you can’t see current budgets or catch overruns ahead of time.
Not to mention, the task of manually aggregating and monitoring project costs is time-consuming and prone to human error.
This is where you need project management software with budget-tracking functionality.
These solutions allow for simultaneously managing all project components — activities, people, and finances. They also provide transparency into (current) project costs throughout the project lifecycle and offer various features to preserve project profitability.
Our platform, Workamajig, is an all-in-one project management system developed for the creative industry. We work with marketers, advertising teams, graphic designers, PR professionals, media buyers, and more in both agency and in-house settings.
Workamajig supports the entire project lifecycle— including pre- and post-project workflows, from initial client acquisition to final invoicing — so you can bring project stakeholders together and manage everything seamlessly in one system.
Our solution packs in various modules to manage project activities: resource planning, time tracking, team collaboration tools, vendor and client management, and financial management. It even includes CRM and GL accounting software to sustain and centralize project processes.
Our system includes:
Customizable project intake forms (more popular for our in-house teams).
CRM software to manage your sales pipeline and convert opportunities into projects.
Project planning tools like task management and templates so you can divvy projects into phases, set milestones, assign project activities for key deliverables, and calculate project schedules. Task management tools let you outline all key details, set start and due dates, designate time allotments and dependencies, and assign work to team members.
Automated estimating to calculate estimates and streamline budget planning as you create project plans with required resources. As mentioned earlier, our estimating tool also incorporates overhead costs and contingencies. Then, managers can review the details, make any final adjustments, and share estimates with clients.
Vendor management dashboard to assign work to freelancers and generate POs for project-related expenses. Then, you can account for these costs in project plans and estimates so you can compare invoices to actuals.
Resource management dashboards to view employee workloads and optimize resource utilization.
Native time tracking to log working hours in the system and calculate labor costs in real time.
Advanced project monitoring dashboards with health monitors, alerts about at-risk projects, and budget trackers to compare actual costs vs. estimates. Our system supports a variety of project management methodologies; you can use Gantt charts, the critical-path method, or the Agile workflow with Kanban boards.
GL accounting software with a full range of features to support standard processes and replace systems like Xero or QuickBooks.
Automated invoicing to calculate client invoices accurately and save time on admin work.
Financial reporting dashboard with profit & loss reports, budget drilldowns, key metrics monitors, and custom reporting options so you can dig into the details of past projects, learn more about your wins and losses, and apply learnings to future initiatives.
Check out a sneak peek of our platform below:
Manage Project Budgets Successfully with Workamajig
The secret to effective project budget management is integrating financial oversight into every aspect of your project workflow. Workamajig eliminates the silos that lead to budget surprises by bringing all project cost data into the same environment where your team plans, creates, and delivers.
Workamajig turns budget management from reactive firefighting into a proactive strategy with:
- Real-time visibility into project expenditures.
- Automated alerts when spending approaches thresholds.
- Comprehensive financial reporting that reveals patterns across your entire portfolio.
The result? Projects that stay on budget and teams that consistently deliver profitable work.
Request a demo to see how Workamajig helps you streamline projects for greater success.
Related reads:
- Most Comprehensive All-in-One Agency Software: Top 3 Picks
- Creative Workflow Management: Best Practices + Software Tools
- Marketing Agency Software: Best Tools to Build Your Tech Stack
Originally published 10/19/2015; updated 3/26/25.
