The 5 Budget Management Skills Every Project Manager Needs

Project managers are known to have many balls in the air at any given time, whether in the IT services world, the marketing realm, design and construction, or beyond. 

But the concern that’s always top of mind, no matter what stage of the project lifecycle, is budget.

Profitable projects require that the budget is strictly adhered to via a process called budget management– 

For project managers, specifically, budget management is the administration and oversight of all finances related to the project. This will include creating a budget and also constantly tracking budget vs actuals as the project progresses, with the aim of arriving at or below that number upon completion.

While software solutions and strategic automation can help project managers stay on track financially, these tools only go so far, which is why project managers should theoretically possess excellent budget management skills. 

But what exactly are these skills and how can you acquire them? Read on to find out!

Why project managers need budget management skills

Budget management skills are vital for any functioning adult in society, but project managers in particular need to develop them in order to be successful. Here’s why:

Make better decisions

Project managers who can effectively create and manage budgets are able to make better strategic decisions in regards to resources and maintaining the profitability of their projects. 

For example, someone who is dialed in on their resource tracking– a subsidiary of budget tracking– will be able to better adapt to changing situations where certain team members may be getting burned out or the timeline is in jeopardy. 

Having a solid grasp of the financial health of the project at any given time should ultimately inform how the project manager proceeds throughout its lifecycle.

Effective resource allocation

Resource planning revolves almost entirely around what the budget says, but without budget management skills, project managers can easily end up going over. 

This is especially critical for professional service firms who may end up overservicing the client and consequently, decreasing the project profit margin. 

Communication with stakeholders & team members

No stakeholder wants to play the guessing game about what’s happening with the project budget. When project managers possess financial skills, they can more effectively communicate with stakeholders, who always want a clear indication of economic viability. 

Managers can quickly derive key metrics project stakeholders want to see, like billable utilization, and easily spit this information out into reports. 

Increase profitability

Whether or not a project is profitable hinges on proper budget management by the project manager. Managers can use their analytical skills to look at project profitability over time to see where there may be new opportunities for increased efficiency. 

For instance, there could be a new process or workflow that could shave hours of time, time (aka money) that can then go back into the pocket of the agency. 

Taking on new business

The current financial health of the overall organization will determine if and when they can take on new business, and this is directly related to project profitability, which requires budget management skills. 

If project managers can’t stick to budgets, scaling a small business or startup may prove impossible, or at the least, more difficult than it should be.

The Essential Budget Management Skills for Project Managers

Budget management skills include the experience and knowledge leveraged when planning and managing the finances of a project. 

The aim is to employ these skills to increase profitability and productivity, while of course, keeping both clients and stakeholders happy. 

Check out the top budget management skills every project manager needs to do just that:

1. Data analysis

To enjoy continued success, project managers must be able to analyze data from their projects, interpret those numbers, and make decisions based on what their interpretation suggests. Although good project management software will help by displaying the relevant figures– profitability, billable utilization, project profit margin, etc– these will mean nothing if they are not digested and acted upon by a human brain. 

Skills for data analysis include knowing your way around software to generate these numbers, and more importantly, what these numbers mean for the financial health of the project and how to adjust accordingly. 

To acquire more skills in data analytics, a great place to start is by getting more proficient with the project management software you’re already using to see what it’s capable of. Reading the help articles and reaching out to customer support can provide guidance on how to interpret different metrics.

We also found this super-informative webinar on data analytics for project managers, but it does require a paid subscription. 

2. Risk management

Project risks will affect whether or not the project gets completed on time and within budget. These include strategic risks, financial risks, performance risks, and external, and positive risks. 

For project managers to effectively tackle risk management, they’ll need some sort of process in place. This will require them to identify, analyze, and prioritize certain risks over others.

Risk management skills include knowing how to build out a risk matrix, figuring out the probability of each risk, and developing mitigation plans to help maintain the integrity of the budget. 

Want to learn more about risk management? Coursera has links to three different courses you can take to get a leg up on risk management skills, and they take up just a few hours of time.

3. Communication

Communication skills are a must in virtually every profession, and they come in handy for project managers in regard to budget. Superb communication skills will empower managers to communicate clearly and effectively with stakeholders, team members, and clients, all of whom can ultimately affect the budget outcome. 

Sometimes negotiation is required and project managers will have to justify unexpected costs. Garnering feedback is another important communication skill both during the budget creation and in the final evaluation stages of the project. 

To improve communication skills for budget management, we like what this Harvard article has to say: be clear and to the point, always prepare, and stay mindful of non-verbal communication because it has a powerful impact, regardless of what is actually being said. 

4. Leadership & learning

The project manager role requires leadership skills as well as the ability to learn on the job. In relation to budget management, leadership savvy helps positively influence the team, the client, and the stakeholders. 

These can empower the people behind the scenes and provide satisfaction for customers who will feel at ease knowing their expectations are being met. 

Being able to learn and grow from experience across different projects is another skill that’s going to inform budget management. A curiosity and desire to learn more may lead project managers to take courses, share experiences with other managers, and read educational material to increase their knowledge. 

To increase leadership skills, project managers can work on building trust with everyone they come in contact with during the project lifecycle. And to increase learning skills, simply reading more about budget management and discussing it with qualified professionals can make a big difference. 

5. Problem-solving

A project manager is a consummate problem solver, and operating within the confines of a project budget requires just that. Problem-solving skills will help to inform decision-making and resolve issues throughout the lifecycle of the project, while always weighing the impact on the budget. 

There’s a lot of information out there about how project managers can increase their problem-solving skills. We really like this YouTube video by Max Mao. It's only 10 minutes long, but he’s got clear, practical advice to help solve issues with budget or anything else related to the health of a project. 

Final word

For project managers to do their jobs effectively, budget management skills are a must. These skills provide the pathways and problem-solving capabilities to keep projects both on-time and profitable.