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project. If you don’t have a template available to start your budget, contact your

accounting department to get the chart of accounts information needed to construct
the budget. The chart of accounts lists the account number and description for each
category of expense you’ll use on the budget. You may remember that we used the
chart of accounts codes earlier in the book for the work package level of the WBS as
well.

To begin creating the budget, list categories such as salaries, contract expenses,
materials, travel, training, and others, and record the cost estimates you derived for

each. Add a column for actual expenditures to date. You’ll use this information during
the Monitoring and Controlling phase of the project to determine the financial health
of the project. Table 7.3 shows a high-level sample budget.

TABLE 7.3 Sample project budget

Account Code Category Estimated Costs

1001 Contract labor $50,000

1003 Materials $2,500
1005 Hardware $22,700

1010 Training $7,000

Total Budget $82,200

You may want to include two additional types of expenses in the project budget:
contingency reserves and management reserves. Make certain you check with your
organization regarding the policies that dictate the allocation of these funds and the
approvals needed to spend them.

Contingency Reserve A contingency reserve is a certain amount of money set aside
to cover costs resulting from possible adverse events or unexpected issues on the

project. These costs may come about for many reasons, including scope creep, risks,
change requests, variances in estimates, cost overruns, and so on. There is no set rule
for defining the amount you should put in a contingency fund, but most organizations
that use this allocation often set the contingency fund amount as a percentage of the
total project cost.

Be aware that stakeholders may misunderstand the meaning of a contingency reserve
and see it as a source of funding for project enhancements or additional functionality

they didn’t plan into the project. Make certain they understand the purpose of this
fund is to cover possible adverse or unexpected events. With the exception of very
small projects, it seems there are always expenses that come up later during the project
that weren’t planned for up front. The contingency fund is designed to cover these
types of expenses.

Management Reserve A management reserve is an amount set aside by upper

management to cover future situations that can’t be predicted. As with the contingency

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