A quick guide to project budget tracking for happier clients
Published on June 25, 2021
Any form of client-facing work is always a double-edged sword. There’s the fun stuff: brainstorming, drawing up plans, creating prototypes, and actually building something. That’s usually why you get into the work. It’s the stuff you want to do.
And then there’s the stuff you have to do. Usually that’s the administrative side: writing reports, answering emails, and lots of meetings. Plus the one thing that every client truly cares about: where their money is going.
No matter how often you go through this process, the admin always takes longer than you’d like. There will be mistakes, they will lead to disagreements, and you will be working on the weekend.
Chief among these administrative headaches is project budget tracking. And as we’ll see, the issues largely come from a mix of unclear budgeting processes and tools that weren’t built for the job.
In this article, we’ll explore a better way to track and report on project budgets, to ensure you’re not spending any more time than you absolutely need to.
But first, a quick refresher on what your budget should include.
How to create a project budget
As a starting point, The Digital Project Manager explains that there are two key types of project budgets:
Time and materials
“A time and materials type of estimate where the client agrees to pay based upon the time spent, and for materials (plus mark up), no matter how much work is required.”
This gives the client flexibility, as they can change their mind and make changes as the project progresses. And you get paid for actual work done, even if it takes longer or is more expensive than you first thought.
“A fixed price estimate is where the client agreed to pay a fixed price, regardless of the amount of effort applied to the project.”
Fixed-price budgets can also come with a fixed scope (ie, where the exact plan is set beforehand), or a flexible scope, where the budget remains the same, but how it’s spent is somewhat flexible.
Clients often love fixed-price budgets because they only need to secure funding for the project once and then don’t have to worry about changes. And naturally for the contractor, if you can fulfill the job faster than expected, you stand to profit.
What to include in your project budget
Workamajig sums it up nicely: “A budget is essentially the sum of all the costs involved in creating the project’s key deliverables - personnel, materials, tools, administrative, etc.”
So your project budget needs to include all of those. And of course, every project is likely to be different, so we won’t state every possible line item here.
Traditional project expense tracking
Once you’ve built your budget plan, you have to actually monitor it during the project and attempt to stick to it. Typically, this is a manual process: project managers submit their expenses to an assistant, or input them into a spreadsheet themselves.
This relies on every team member keeping good track of what they spend as they go and updating those spreadsheets. They’ll also need to keep receipts along the way.
Kissflow emphasizes a Levvel study, which revealed that businesses which hadn't adopted expense management automation struggled with:
Manual entry and routing of expense reports (62%)
Lack of visibility into spend data (42%)
Inability to enforce travel policies (29%)
Lost expense reports (24%)
Lengthy expense approval system and reimbursement cycles (23%)
Construction crews, law firms, and agencies have been doing things this way for decades. And it’s essentially fine, until a client wants to get really deep into those costs, or unless a team member lets the budget get away from them.
But it is highly manual work. It can take hours each week to manage budgets, and there’s plenty of room for error.
Unless you have a secret weapon...
Integrated project expense tracking for smarter spend
The key thing that makes tracking budgets difficult is that your payment methods - usually company credit cards - aren’t really designed to track anything. They’re a (sometimes) convenient way to pay for things without needing wads of cash.
But to actually know what’s been spent - especially if you weren’t the person making payments - you either have to rely on receipts being handed in or go back through the credit card statements. Which is a pain and bound to lead to issues.
Thankfully, we now have the technology to track card payments in real time through apps and software. You probably already know Revolut or Monzo, which are great for private spending and family budgets.
And there's a great range of business budgeting software available. You can give each project management a prepaid or debit “company card” which records what they spend as they go. This shows you:
Who spends, since every employee can have a card (unlike with classic corporate credit cards)
Which budget has been debited, because the spender assigns each payment to the project at the point of sale
Receipts and invoices, which are digitized and attached to their relevant payments
This makes life easier on project managers, who don’t have to carry around stacks of receipts and try to piece together their spending after the fact. It’s also perfect for the firm’s finance team and administrators, who can check budgets in real time and always know where client money is going.
How project budget tracking works
Plenty of project managers get by with Excel sheets and other relatively simple tools. (No slight to Excel, which is obviously beloved by finance teams and managers everywhere.)
In fact, 51% of finance leaders still depend solely on Excel for their processes, according to this MHR report on the shape of finance.
They also have smart accounting tools that record transactions, and maybe even some decent reporting software.
But while these tools give you the essentials and let you set out your project logically and clearly, they still leave you with a lot of heavy lifting.
According to Finance Monthly, "almost a third (31%) of finance leaders rate unsaved spreadsheets and lost documents as the greatest risks of their role."
After all, managing a project budget always comes back to spending. Every dollar or pound that goes on the company card needs to be recorded correctly and assigned to the right client. So if you can modernize your spending tools (and move away from that standard company card), you stand to gain massively.
We’ve written extensively about why the standard company credit card is a bad idea. So what’s the better choice? You can actually combine the ease of payment you expect from a credit card (they’re popular for a reason), with spend tracking and reporting and software that captures every penny spent.
You can have debit cards with preset budgets just for a specific project or campaign, and every purchase you make will be automatically recorded and filed against that project.
A full payment history at your fingertips
As the name suggests, spend management softwares are there to help you manage spending, whereas company cards are really just there to make payments. The difference is, you can have the full payment history for every project and team member available any time - and always up to date.
The second a team member pays for something, you have the purchase history. You can be sure that these purchases are necessary and in line with what the client expects.
And at any moment, you can search back through the project’s history to identify one particular payment, all the payments to a certain supplier, or every payment made by a single team member.
The level of budgeting control and security this gives you over project budgets is extraordinary.
And clients obviously love this. If you choose, you can share a fully itemized, accurate spending history with them in real time. If they want to know how much is left in a particular budget, it only takes a moment.
This is incredibly valuable during active campaigns, and it’s also perfect for planning the next one. You can see exactly how much was spent on each task or vendor, so you’ll have a fair idea of what to expect with your next client.
Payment coding at point of sale
With your trusty mobile phone, you can assign a payment to a certain project the moment you make it. And then you can code the next payment to a different client seconds later.
Compare that with the process of looking back through credit card statements at the end of the month and trying to figure out which belongs to what. The benefits are obvious.
And you do this at the point of sale, when you’re fully aware of the context and rationale for the purchase. You can even add notes to help you write better reports later.
When it’s time to compile your monthly client budget report, all of the work is already done. The client can see every purchase, the rationales for spending, and the remaining budget without you having to do much of anything.
Which certainly beats the hours spent compiling these reports by hand.
Easy cost center management
This payment coding is also hugely helpful for cost centers. Just as you can code and record payments made for clients, all of your internal purchases are coded and tracked.
You’ll almost certainly be working hard to keep company expenses down. And that gets more complicated when it’s hard to tell the difference between company and client payments - which becomes more challenging at the end of the month when the purchases are no longer fresh.
Instead, these spend management tools let you assign payments when you make them, as explained earlier. You can also designate specific suppliers as being mainly for internal purchases (Amazon or your coffee supplier, for instance), and these will be automatically coded this way.
Properly managed spend is just so much easier to classify and assign to the correct budgets, whether they’re client budgets or your own.
Flexible, transferable payment methods
What happens when Gary leaves the company, but the credit card is in his name? You have to order a card, of course. But what if Gary is responsible for the online spending, and there are 50 or so client campaigns running in Gary’s name?
You have to wait for that new card, and then spend hours updating all of those campaigns, of course.
Another advantage of these more modern spending methods is that, while the cards do have names on them - most payment processors require this - you can easily change the name and have a new card up and running in seconds.
That’s how it works for Dana at Koru Kids. “It's not just about the employees being able to get cards for subscriptions. The focus is on the subscription itself now, and then you can just change the owner whenever you need to. It makes subscription management incredibly simple.”
Flexible preset limits and fraud prevention
As a general rule, you need to be careful with money - both for the client and the company. So trusting every team member with a card is obviously a concern.
But good spend management lets you set specific limits on each card, and make certain payments off-limits. If certain team members only need to make small, ad hoc purchases, they might only have $30 (or your currency of choice) pre-approved. For every other payment, they need to make a request through the app.
Other team members may have higher spending needs and have earned your trust, so perhaps $1,000 per month is approved.
You can even set the cards so that every single payment needs approval, no matter the amount. When an employee is out on a job, they can make a request for funds to the project manager (digitally), and then they have the exact amount available to be spent that day, with that vendor. Try to spend that money somewhere else, and it won't go through.
The point is you give your team the freedom to move quickly and make payments when they need, with no fear whatsoever of abuse or mistakes. That gives you peace of mind, and the same goes for the client.
Consider smart project budget tracking
Hopefully this has given a clear idea of how good spend management software makes a project manager's life far simpler.
Project budget tracking shouldn't be difficult. In fact, it can almost certainly be faster, easier, and more secure than the classic processes you're used to.
Most solutions are quick to set up, unlike many finance tools. From there, the hardest part is waiting for your new cards to arrive!
Learn more about how Spendesk helps with project tracking and spend control: