From the course: Project Management for Creative Projects

When to pad the budget

From the course: Project Management for Creative Projects

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When to pad the budget

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- If you talk to an experienced project manager, you may hear the phrase uttered known unknowns. This is basically saying that there are things that we can't plan for or details that we don't know right now that are going to come out later. As such, it's often important to build in some pad to the budget as well as the schedule. These known unknowns allow us to make sure that there's extra money set aside for contingencies or variations. For example, we might put in a travel estimate, but specify that travel costs vary and could get more expensive as we get closer to the travel time. Or that we don't know exactly how many actors we're going to need to cast and how many people we can use from the organization. So we've built in a budget for actors or for stock footage or stock photography. If you don't spend all of this then that money can get reassigned to other areas or returned to the client or put to something else. You also need to pad the budget if you know the schedule is going to be rushed. Now, if it's not really the client's fault, but the fact that you're spread too thin or have to push things off because you're trying to run multiple projects at once, well, then it's a bit difficult to pass those charges on. But if you know the project is rushed, building in a little bit of extra financial pad is pretty important so you can deal with rush charges or overtime. It is very difficult to recover cost overruns after the fact. If you've built in a contingency feet or padded the budget it's much easier to have money left over that you return. Or to give the client a range of a budget that they're approving. And not to exceed a target number and if anything is left over, apply it to something else. You also need to keep in mind that the client may ask you to pad the budget. They may know that there's going to be variables or that that internal manager that they work with frequently changes his mind. By building in some pad you have flexibility. Now, in a competitive workspace and a competitive industry like ours, it's difficult to put a lot of pad in there, but try to build in a little bit extra so you can deal with things as they arise.

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