What is a Budget Estimate?
A budget estimate refers to the approximation of the cost of a program, a project estimate, an activity, or a job. The purpose of preparing such an approximation is purely for planning and budgeting. Although it is simply a definitive estimate and is seen as somewhat inaccurate for providing a basis for a firm commitment, it can serve to make individuals understand the scope and expense of what needs to be done.
How to Make a Budget Estimate?
Budget estimates serve as forecasts that are used during project plans or the preliminary stage of an activity, and it needs to be written properly to guide the professionals who rely on it. Utilizing one will enable the professionals to prioritize strategy while also focusing on investments and risks. If you wish to learn how to make a budget estimate, just refer to the instructions listed below.
1. Identify the Types of Budget Estimates
A budget estimate can refer to either of the six different types, namely cost estimates, revenue estimates, cash flows analysis, risks, returns, business activities. While each type is different from the other, they work together wherein one type relies on the data of the other. Familiarizing yourself with these types can actually help you in creating a much more effective budget estimate for your projects and activities.
2. Create a Gantt Chart
A Gantt chart is a specific type of bar chart that provides individuals with a visualization of a project's schedule. This chart serves to illustrate the start and end dates of specific elements of a project. By creating a Gantt chart, you'll have a "clear as crystal" overview of the project and know what will happen at a particular point, which can actually help you in allocating the expenses and in making the estimates.
3. Consider both Direct and Indirect Costs
When preparing the budget estimates, always consider both direct and indirect costs. The direct costs include direct labor (when hiring freelancers), material, and transportation costs. Indirect costs, on the other hand, include office, equipment, and administrative costs. Many budget estimates neglect the indirect costs which leave the professionals to find out later in the process that their actual expense is actually higher than the estimated value.
4. Bring All Information Together in Outline Format
After gathering all the needed data, bring everything into writing but don't make it final yet. Simply outline all the information that you've gathered in order to have something to present to the client or investor. After all, having all the details presented clearly and in a straightforward manner is the most important requirement of a great budget report.
5. Gather Feedback from the Client
Once the outline of the budget estimate has been presented to the client or investor, ask questions to them or encourage them to bring up concerns. This way, you'll be able to determine which details of the project weren't covered and you'll still have enough time to make adjustments to the budget estimate. When presenting the business estimate, the only thing that you should expect other than changes in your client's approval.
6. Finalize your Budget Estimate
Finalizing the budget estimate involves writing them on a document processing tool, proofreading, then print copies of it. Ideally, multiple copies should be printed so that the client will have their own copy and you'll have something that you can keep for record purposes. And just like any other legal document, you and your client should affix your signatures on the budget estimate.