We all know that a project budget is an essential component of project planning. However the time phased budget provides more benefits than most of us realize. Of course, it is the cost baseline for the project and allows tracking and reporting of actual results for the project. It also provides additional value:
it is the basis for calculating Earned Value Management (EVM) metrics which provide the project performance status for cost and schedule
it reveals funding requirements and projected cash flow for the project
it substantiates the need for borrowing if required
it provides the cost side of the business value statement
it can be used to explain committed spending versus actual payments, spending limits and approvals, and cost categories
it contains contingency or reserve funds based on the risk plan
Considering these characteristics, project managers should realize the importance of creating an accurate project budget. It is essential to consider the Work Breakdown Structure (WBS) in the cost estimating process and using that information to create the time phased budget. It should be obvious why the project budget is one of the most important documents in the project.