How to Track a Project Budget and Manage Cost Changes
The four figures that actually matter, a complete worked tracker, and a cost increase taken from discovery through to a recorded decision.
Quick answer
Tracking a project budget means comparing the approved amount against what you have actually spent, what you are committed to but not yet invoiced for, and what you still expect to spend. Those three added together give the forecast final cost, and that is the figure to compare with the budget. Identify differences early, work out what caused them, and take options to whoever holds the authority rather than absorbing the change quietly.
BSB40920 Certificate IV in Project Management Practice
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Key takeaways
- Spend to date tells you almost nothing. Forecast final cost is the number that matters.
- Keep actuals, commitments and remaining estimates in separate columns, or you will double count.
- Keep the original approved budget visible when it changes. Rewriting it hides what happened.
- A proposal is not an approval. Nothing moves into the approved column until someone with authority says so.
- Not every overspend is poor management. Some are price rises nobody controlled.
What should a simple project budget include?
Whatever the project will actually cost, grouped so that a difference in one area is visible rather than buried. Common categories:
- Staff time, where it is costed. Many small projects do not cost internal time, which is a choice rather than an oversight, but be consistent about it.
- Suppliers and contractors
- Equipment, purchased or hired
- Software and licences
- Other project expenses: printing, venue, travel, consumables
- Contingency, an agreed allowance for the things you cannot foresee
The right categories depend on the project. A system implementation and an office move have very little in common on this list. What matters is that each category is something you could ask a sensible question about.
Set an agreed budget before tracking expenditure
Record three things when the budget is approved, and keep them where you can find them later.
The approved amounts, by category. This becomes your baseline and it does not change unless someone with authority changes it.
The assumptions behind them. Thirty attendees at $30 a head. Two days of contractor time at the quoted rate. Assumptions are what you check first when a figure moves, and they are impossible to reconstruct six weeks later.
Who can approve changes, and up to what amount. A named person, not a role nobody can find.
When the budget does change, record the change alongside the original rather than overwriting it. A budget that silently becomes whatever was spent teaches nobody anything.
Understand the figures you are tracking
| Figure | What it means | Where it comes from |
|---|---|---|
| Approved budget | What was agreed, plus any approved changes | The approval record |
| Actual expenditure | Money spent and invoiced | Accounts or invoice records |
| Committed costs | Orders placed or agreements made, not yet invoiced | Purchase orders, confirmed bookings, signed quotes |
| Further estimated costs | Work still to come that has not yet been ordered | Your own estimate from the remaining plan |
| Forecast final cost | Actual + committed + further estimated | Calculated |
Build a simple budget tracker
The same fictional project used in our planning guide: a four-partner accounting firm running a one hour information session for small business clients. Position shown at Day 19, once attendee numbers were confirmed at 28. All figures exclude GST.
| Cost item | Approved budget | Actual to date | Outstanding commitments | Further estimated | Forecast final | Variance |
|---|---|---|---|---|---|---|
| Venue hire | $600 | $600 | $0 | $0 | $600 | $0 |
| Catering | $900 | $0 | $980 | $0 | $980 | +$80 |
| Printed handouts | $250 | $0 | $0 | $230 | $230 | −$20 |
| AV equipment hire | $200 | $200 | $0 | $0 | $200 | $0 |
| Contingency | $150 | $0 | $0 | $0 | $0 | −$150 |
| Total | $2,100 | $800 | $980 | $230 | $2,010 | −$90 |
Forecast final cost = actual + outstanding commitments + further estimated. Variance = forecast final cost minus approved budget, so a positive figure means forecast spending exceeds the approved budget. The practice manager updates the tracker weekly from the accounts system and the booking confirmations.
Compare expected final costs with the budget
Look at that tracker as a partner might. Spend to date is $800 against an approved $2,100. Barely a third of the budget gone. Comfortable.
It is not comfortable, and it is not a meaningful comparison. Nothing has been invoiced for catering yet, and catering is nearly half the project. The forecast final cost of $2,010 is the honest figure, and it is only below budget because the $150 contingency has not been touched.
This is why spend to date is close to useless on its own. A project can be 20 per cent spent and 90 per cent committed, and a project can look dangerously overspent in month one simply because an annual licence was paid upfront. Always compare the forecast with the budget.
Investigate a cost difference
Catering shows +$80. Before telling anyone the project is over on catering, work out why.
- Establish the cause. The budget assumed 30 attendees at $30 a head. The caterer’s current rate is $35, and 28 confirmed attendees gives $980. The rate rose; the numbers fell slightly.
- Check the remaining work. Catering is now fully committed, so this figure will not move again unless numbers change.
- Work out the effect on the whole project. At project level the forecast is still $90 under budget, because the contingency is intact.
That third step is what turns a figure into useful information. “Catering is over by $80” invites a reaction. “Catering is over by $80 because the rate rose, and the project is still $90 under overall” invites a decision, or no decision at all, which is often the right outcome.
Worth saying plainly: a supplier raising prices is not evidence of poor management. Treating every variance as a failure is how people learn to stop reporting them.
Assess a proposed change
At Day 20 the managing partner asks whether attendees could be given a printed folder with the firm’s service summary alongside the handout. Quoted at $170.
Assess it on four dimensions together, because changing one moves the others.
| Dimension | Effect |
|---|---|
| Cost | $170. Forecast would move from $2,010 to $2,180, which is $80 above the approved budget |
| Scope | An addition. Folders were not in the original scope |
| Timing | Printing is already scheduled for Days 20 to 21. Adding folders is feasible only if ordered today |
| Quality | No effect on the session itself. Arguably improves the follow-up |
Then put options rather than a yes or a no.
A. Keep the original scope
No folders. Project finishes around $90 under budget. Nothing is lost that was ever promised.
B. Substitute
Upgrade the existing handout to include the service summary instead, for roughly $60 more. Within contingency, no budget change needed.
C. Add the folders and increase the budget
The $150 contingency covers most of the $170, leaving $20 short, so the budget needs to rise by $80 to hold the variance at zero. Requires approval.
Record approval and update the forecast
The managing partner chooses option C. Here is the record.
- Change
- Add 30 printed client folders to accompany the handout
- Requested by
- Managing partner, Day 20
- Cost
- $170 excluding GST
- Effect
- Forecast final cost rises from $2,010 to $2,180. Contingency of $150 absorbs most of it, leaving $80 above the approved budget of $2,100
- Options put
- Keep original scope; substitute an upgraded handout at about $60; add folders and increase the budget by $80
- Decision
- Approved. Folders added and the approved budget increased by $80 to $2,180. Original budget of $2,100 retained on the record
- Approved by
- Managing partner, Day 20
- Tracker updated
- Printing category: approved $330, further estimated $400, forecast $400. Project forecast $2,180 against approved $2,180, variance $0
One distinction worth holding onto. The practice manager costed the change, worked out its effect and prepared the options. The partner approved the money. Preparing a decision and holding the authority to make it are different jobs, and a project support role does the first, not the second.
Communicate the position clearly
A budget update is three sentences, not a spreadsheet attachment nobody opens.
State the position, the reason for any difference and what decision is required. If no decision is required, say that too, because silence reads as a problem being hidden.
Close out the budget
When the work finishes, the budget is not finished. Three things remain.
Chase outstanding invoices. Anything still in the committed column needs to arrive and be paid, or be released if it was never going to be charged.
Reconcile. Check your tracker against the accounts records. They should agree. Where they do not, find out why before you close, not after.
Capture what you learned about estimating. The catering rate had risen since the last event and nobody checked. That is worth a line in the review note, because the next estimate will be better for it. Lessons that stay in someone’s head are not lessons.
For the wider planning method this budget sits inside, see our guide to writing a simple project plan and schedule, which uses the same example project.
Frequently asked questions
How do you track a project budget?
Record the approved budget, then track three separate figures against it: what has actually been spent, what you are committed to but have not yet been invoiced for, and what you still expect to spend. Adding those three gives your forecast final cost, which is the number you compare with the approved budget.
What is the difference between actual costs and committed costs?
An actual cost is money already spent and invoiced. A committed cost is an order you have placed or an agreement you have made where the invoice has not arrived. Both count towards the final figure, and counting the same order in both columns is the most common tracking error.
Does spending less than the budget mean a project is on track?
No. Expenditure to date tells you nothing on its own, because work still to come carries cost still to come. A project that has spent a third of its budget with three quarters of the work remaining is heading over. Compare the forecast final cost with the approved budget, not the spend to date.
What should you do when a project cost increases?
Establish the cause and the effect on the final figure before proposing anything. Then present options: keep the original scope and absorb the increase if there is room, substitute something cheaper, reduce scope, or request additional funding. Take the options to whoever holds the authority and record their decision.
Who approves a project budget increase?
Whoever holds the financial authority, which is named when the budget is approved. Preparing the information for that decision and holding the authority to make it are different roles. A support role can recommend, cost and document a change, but the approval has to come from the person with the delegation.
Practise this on a full project
Cost planning, tracking and change control are part of the practical work in the Certificate IV, assessed on documents you produce rather than questions you answer.
Ask About the CourseSee the units and assessments on the BSB40920 Certificate IV in Project Management Practice course page.
