Expense items in the project budget

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The project income and expense budget determines its profit and cost for the company. The basis for drawing up the project budget is the contracts with the customer and the cost estimate for the project. The project budget consists of two parts - income and expenses, which are planned taking into account the deadlines for their implementation in accordance with the signed contracts. The income and expense parts of the budget are distributed according to income and expense (cost) items.

The budget provides an opportunity to accurately predict the profitability of the project. The expenditure part of the project has a greater number of expense items and other costs. The expenditure part includes direct costs - wages, purchase of materials and services, as well as indirect costs.

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Cost estimate
The cost estimate, distributed over the project time periods, includes:

Project operating expenses

Operating expenses include netherlands email list the costs of resources that ensure the implementation of work on the project:

costs of purchasing materials and equipment;

subcontractor costs;

direct costs of personnel remuneration.

Management expenses

Management costs are understood as expenses associated with project management and support for its functioning, but which do not relate to individual works and tasks.

They apply to the entire project as a whole:

Management and organization of project implementation.

Training of workers participating in the project, certification of works, licensing.

Payment of travel expenses.

Maintenance and operation of existing equipment.

Expense items in the project budget

Overheads

Overhead costs are expenses that cannot be included in any project, but they constantly arise during its implementation. They must be distributed between projects. Several options for budgeting overhead costs are used:

Write-off of overhead costs to the overall financial result, taking into account separate budgeting of overhead costs.

Distribution of overhead costs according to coefficients that take into account the importance (priority) of projects.

Determining the rate of reimbursement of key workers taking into account overhead costs. The rate allows for the distribution of overhead costs across projects in proportion to the time spent on them. The rate may differ for different groups of workers and may also depend on the timekeeping system.

Use of internal subcontracting. For this purpose, transfer prices are established between the company's divisions, which can be determined by the market value for the same work or by labor costs, taking into account the coefficient for covering overhead costs.

Reserve for expenses that are virtually impossible to predict

The reserve is calculated for each possible risk and allows for small deviations in project expenses. It is strongly recommended not to calculate the reserve as a fixed percentage of revenue or cost. The reserve must be justified by objective factors influencing the project and the actual state of affairs in the project. The size of the reserve for the project must be determined based on assessments of the actual risks that may arise during the project.

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