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The road to Project Success – this is how you prevent budget overruns

Many organisations still consider budget overruns in both time and money as the major threats for the success of their business software projects or digital transformation initiatives. An interesting and valuable question is how you can prevent these overruns. In this article we analyze the reasons that can lead to financial budget overruns. And of course what you can do to prevent this.

Let’s start facing reality. Most organisations are inexperienced when it comes to budgeting for project success. And that makes of course sense, simply because they only modernize or replace solutions every 8 to 10 years. This observation makes it even more important to prepare your budget planning very well.

Here are 5 important causes for budget overruns.

1.Incomplete budgets
This probably is the most simple cause that you can control. Making sure that the budget is complete and that it contains enough bandwidth to achieve success. Categories that are often underestimated these days are to be found in the domain of end-user training and in Organizational Change Management. It’s really hard to over-spend on change management!

2. A poor preparation phase
The most important part of your preparation must take place before the consultants of your favorite implementation partner enter the building. For effective budget management, it’s crucial that you know what you want to achieve and how you want to do that before the meter starts running. Starting with the right internal preparation on time is crucial to control your financial budgets.

3. Underestimating the complexity
Many organisations underestimate the complexity of implementing new business software. They still believe that it’s a technical project, while ignoring the fact that a new solution forces the team to work, think and act in a completely different way.

4. Underestimating the amount of work
The same counts for the amount of work. At the time of negotiations, all focus is on the new project. Everybody is highly involved and super enthusiastic. Unfortunately, as soon as the project starts – other priorities appear on the radar. Winning that one big new customer. An unplanned reorganization. Key staff getting ill or leaving the company. Without the right focus you will eventually be forced to outsource a bigger part of the work to your implementation partner. Exceeding the financial budget is then a logical consequence.

5. Never stop adding complexity
A last important cause of budget overrun is adding complexity during the implementation process. Many organisations lack the discipline to stick to the agreed functionality and the amount of change as defined before the start. Of course it’s tempting to give in to the extra wishes from the organization. But it will ruin your financials budgets, your time budgets and the motivation of your teams! So it’s always better to avoid (extra) complexity. Add all good ideas to the so called ‘optimization list’ and use that document to define step 2 of the implementation process once step 1 is done. This is a great way to manage and control complexity and stick to your financial budget.