When preparing a draft, it is usually not yet possible to establish a detailed budget. However, you should at least make an initial estimate of the costs and revenues. When fleshing out the draft into a concept, project planning should be at the stage where the funds required to execute the project can be enumerated. Where income is concerned, a list should be made of who will or should pay for the expected costs.
Full cost accounting
The project budget should include everything related to the project with an impact on costs under Expenditure as required by full cost accounting. Estimating the costs of interventions in complex social systems is always uncertain to some extent. A reserve for unforeseen events should therefore be factored in.
The Income side must list under equity all financial contributions from the executing institution in addition to external lenders and all gratuitous contributions and benefits from the executing institution.
The sums of expenditure and income should be balanced, as someone must pay for all of the costs incurred in connection with a project.
Accounts and classes of accounts
In accounting, the individual budgetary items are also called accounts, and are consolidated into classes of accounts. For example, the costs of project management (account) can be included in "Personnel costs" (account class).
The executing institution and external lenders can determine how a budget should be drafted and the level of differentiation (account plan).
On the cost side, the expected personnel, operating and material costs are reflected in the budget.
The labour costs for project management and work on the project team often make up the greatest share of the costs of an intervention project.
It is more difficult to calculate the expenditure for implementing the various measures during the planning phase, as these cannot and should not be planned in detail that early.
Operating and material costs
A detailed list of expected operating and material costs should include the use of infrastructure and other resources of the executing institution, and should be made binding. Even if it does not charge for the use of workstations, computers, telephones, copiers, etc., these costs should nevertheless be calculated. Gratuitous use can be booked under income as equity in the same amount.
Interventions in settings usually require close collaboration with key persons and representatives of the target groups. Depending on the geographical locations of the project and target system and the related travel time, those involved will incur a certain amount of additional costs that have to be compensated.
If products are developed and produced as part of the project, further costs will arise which under certain circumstances could account for a very high portion of the total costs of the project.
Depending on the requirements of the project and composition of the project team, it may make sense to delegate certain tasks which require specific qualifications (e.g. evaluation, marketing, product development) to third parties. Quotes may have to be obtained for such external services before they can be budgeted.
Discussions with key persons at the executing institution should first determine the amount of equity. The executing institution can assume other costs in addition to the use of infrastructure and the project work that is performed in the course of regular employment. Equity usually only covers part of the total costs, making it necessary to seek additional sources of capital.
Foundations, funds and other potential lenders expect a funding request to include a summary of all anticipated project costs, or at least specific information about the executing institution's equity and other potentially secured or requested borrowings from other lenders. It is also possible to find sponsors for the project in the private sector. You can find out more in the "Fundraising" topic.
Although this tends to be rare in health promotion and prevention, income may be generated during implementation (e.g. by selling products or services).
If you are in the fortunate situation in which all budgeted equity and borrowed capital has been bindingly secured, you can begin implementing the project. Otherwise, if only some of the budgeted funds have been secured, you have three options: raise more third-party capital, rescale the project or abandon it entirely. Rescaling means you have to redefine the project objectives and rethink the planned approach in terms of expenditure and effectiveness.
Why you would disregard these aspects
- You have no idea how much time will be needed to accomplish the scheduled tasks and thus cannot prepare a detailed budget.
- You cannot draw on the experience of previous projects since you believe you have developed a new approach.
What you have to gain
If your project is well justified and your budget has been planned in a comprehensible manner, your funding requests to the (your) executing institution and other lenders have a better chance of being approved.
If you prepare the budget carefully and take into account experience gained from previous projects, you will avoid financial and staffing bottlenecks and you will not be responsible for surplus funds in the end.
What you can actually do
The Budget checklist provides a number of points to remember when drawing up a budget.
It is worthwhile to consult and compare budgets and financial accounts from previous projects.
Submit your budget for review to people who have a lot of experience in the field.
It is often difficult to estimate costs in terms of time and personnel. Work protocols with detailed timesheets from previous projects are an invaluable resource.
Questions for critical reflection
- Do you have a detailed time budget for all planned activities?
- Is the budget based on the real requirements of the project, i.e. according to the stated objectives and methods?
- Is the project budget sufficiently detailed in order to be useful for managing the project?
- Is all income and expenditure listed fully and in detail?
- Have experiences from other projects (final accounts, timesheets) been taken into account?