Budgeting for a software development project is not easy to do. Changes in scope, delays in the process, and unanticipated setbacks can all make it hard to predict the cost of a project.
That said, it’s vital to come up with as accurate a cost estimation as possible to make sure a project is worth the investment while having adequate capital to fund the project. Additionally, you want to measure the financial value of reducing risks associated with the organization and the project itself.
There are a few different budgeting methods that teams can employ. Comparative budgeting uses a recent, similar project to set the budget for an upcoming project. Bottom-up budgeting involves creating a detailed list of tasks, each having its own estimate. In top-down budgeting, teams estimate big “buckets” of the project, using those projections to calculate an overall budget. Finally, some teams use a blended method, combining two or more budgeting methods.
It’s essential to appreciate from the outset that comparative budgeting and bottom-up budgeting are the most accurate models. So, if you use a different type of model, plan for more contingencies.
Whatever model you choose, some common budgeting mistakes can lead to major problems and interfere with the success of your project. Here are a few common mistakes to be aware of and avoid.
Rushing the Estimation Process
It’s tempting to push a team to put together a cost estimation for an upcoming project quickly. While it’s nice to get numbers sooner rather than later, rushing the process is a bad idea.
Instead, you want your team to have a formal planning stage that involves thorough research. During the research phase, have meetings with the development and business teams to fully understand the project goals and scope. In addition, it’s important to confirm that the dev team understands the context, audience, resources available, and any other key factors.
This research period is an essential step of the budgeting process, helping to avoid costly mistakes and direction changes — so make sure that your team doesn’t skip or rush through it.
Failure to Decompose Tasks and Set Priorities
During your planning phase, it’s worth taking the time to decompose tasks while setting clear priorities for tasks. Decomposing simply means breaking the significant tasks into smaller ones. While it seems like a simple step in the planning process, it’s critical to specify requirements, identify risks, and ensure that your dev team has a clear roadmap and accurate scope.
When you decompose tasks, you can then prioritize them to ensure that the project remains connected to business value while achieving business goals. Plus, it makes it easier to know what to focus on should the scope and funding become an issue.
Failing to Communicate Across Teams
Another way to create mistakes and frustrating holdups is by not conducting a cross review at the beginning of a project. Your project will likely involve developers across different platforms, requiring collaboration across teams. As such, effective communication and cooperation are key for a smooth project.
Start with a cross review of essential tasks and technical requirements. This is one of the best ways to reduce the risk of duplicate work, wasted time, and miscommunication across teams.
Not Obtaining Funding for More than 100% of the Cost Estimate
Software development is an ongoing project that is never completely finished. You’ll need adjustments, updates, and continued development. This, coupled with the likelihood of unexpected costs, means that you want to have funding for more than the budgeted cost.
It’s a good idea to aim for funding for about 150% of the budgeted cost to make sure you have the capital to complete the project as changes occur.
Overlooking Maintenance Costs
Similarly, your project costs don’t stop once the software is developed. There are ongoing maintenance costs that should be factored into the initial budget. Overlooking maintenance costs can lead to an incomplete scope of work from the outset. In addition, it risks your team going into tech debt, and taking on projects that don’t make good business sense.
To avoid this, make sure that your cost estimate includes creating:
- QA for the whole product,
- maintaining the infrastructure and server framework,
- automating tests, and
- updating regularly.
Treating Estimates as Final Values
Finally, while you want your estimates to be as accurate as possible, consider that they are just estimates, not final values. Distillery Project Manager Daria Ivaniushina reminds leaders that “[e]stimates are always provided based on assumptions — yours or your colleagues’ — and treating them as final, super-reliable values may not lead to the best results.”
Keep this in mind as you begin a project, be prepared to be agile and ready to adjust as needed.
A Good Development Team Makes Budgeting Easier
A good development team is one of the best ways to make sure that your project goes smoothly, stays on budget, and is completed on time. At Upstack, we can help you build your remote team of developers to meet any project needs.
Contact us today to learn more or to start hiring developers.
Whether you are in the product discovery phase or are looking for a partner to launch your software development project, CONTACT US! We’re happy to help you discover the advantages of a dedicated remote team!
Originally published at Upstack.co on Dec 10, 2021, by Charlie Harper.
