What are the most common reasons for budget variances?

Worst human error: budgeting low. When using numbers that are accurate, add 20%. When your numbers are uncertain, reference past project budgets with similar parameters and account for inflation, then add 20%. Budgets should be set high, or pessimistically, to permit flexibility of the team assigned responsibility for managing it. Then encourage decision making at the point of RFQ/RFP to shoot for 10% under the budget given.

Increased costs to supply budgets related to inflation is a big reason to give a little more cushion to that particular line item.

- Working in the world of non-profits, there isn’t much room to go over the budget. - Identifying other resources available at no cost and problem solving techniques can get you through.

Scope creep is a dangerous aspect of any project. Clearly defining scope and exclusions at the start of the project is the most important aspect of preventing creep. Scope changes must be heavily restricted or permitted only with formal acceptance of all stakeholders of the consequences of the changes. Applying additional charges/discounts in the event of scope change can limit creep to only that which is of most dire need.

As mentioned in the first section, the 20% grace is a vital practice. It is often said that one should plan for the worst but perform to the best. Coming under budget is always preferred going over budget. When there are factors outside of the control of project management, the 20% grace helps provide the buffer needed to keep the project on track with minimal interruption.

Totally agree , Itis very important factor which will highly decrease your forcast accuracy with high error percentage and as overall result a clear budget gap will appear

Implementing daily rundowns and requiring participation of all project members in updating schedules can reduce operational problems. Getting ahead of possible issues is important and the only way to do so is with active communication and always thinking two weeks ahead. While daily rundowns should be focused on the immediate 24 hour period, weekly briefings should be held to look out two weeks ahead. Communication and forward thinking might not prevent operational problems 100%, but can significantly reduce them or their impact on the project.

Strategic decisions will always impact projects that are active in the near term period of the strategic plan change’s period. There are few options available when strategic level decisions come down on active projects. However, when projects are expected to take longer than a year, close coordination and involvement of strategic level management in regular project meetings can help prevent such activities from causing problems. Awareness of current state amongst strategic decision makers is vital to sound strategic decision making. Project managers must be proactive in keeping those actors aware and up to speed on their projects so it is always on their mind.

Budget variances, the deviations between projected costs and actual expenditures, often arise from a few recurrent sources: 1. Unforeseen Circumstances - external events like economic downturns or natural disasters. 2. Inaccurate Estimations - initial budgeting might have lacked detailed analysis or been overly optimistic. 3. Scope Changes - alterations or expansions in project goals post the budget's approval. 4. Operational Inefficiencies - unanticipated bottlenecks or delays. 5. Market Fluctuations - changes in supplier costs or currency exchange rates. Dissecting these variances isn't just about number-crunching; it's a deep dive into understanding the underlying dynamics of operations, enabling more informed future budgeting.