What are the common causes and risks of project budget deviations?

1 Scope changes

One of the most frequent causes of project budget deviations is scope changes, or the addition or modification of project deliverables, requirements, or features. Scope changes can occur due to various reasons, such as changing customer needs, new regulations, market trends, or technical issues. Scope changes can increase the project's complexity, duration, and resources, and thus affect the project's budget. To avoid or minimize scope changes, you should define and agree on the project scope clearly and formally with all stakeholders, and follow a change control process to evaluate and approve any changes.

3 Resource issues

A third common cause of project budget deviations is resource issues, or the challenges or constraints in acquiring, allocating, or managing the project's human, material, or financial resources. Resource issues can occur due to various reasons, such as shortages, delays, turnover, quality, or performance. Resource issues can impact the project's budget by increasing the project's costs, reducing the project's revenues, or affecting the project's quality or scope. To avoid or minimize resource issues, you should plan and monitor your resource needs and availability, communicate and negotiate with your resource providers and users, and implement corrective actions when needed.

5 Stakeholder expectations

A fifth common cause of project budget deviations is stakeholder expectations, or the perceptions or assumptions of the project's sponsors, customers, users, or other parties involved or interested in the project. Stakeholder expectations can differ from the project's actual or planned results, and can influence the project's scope, quality, or satisfaction. Stakeholder expectations can affect the project's budget by requiring additional or different work, resources, or deliverables, or by causing disputes, conflicts, or complaints. To avoid or minimize stakeholder expectations, you should identify and engage your stakeholders, communicate and manage their expectations, and deliver and measure their value.

6 Reporting errors

A sixth common cause of project budget deviations is reporting errors, or the mistakes or inconsistencies in collecting, analyzing, or presenting the project's budget information. Reporting errors can occur due to various reasons, such as human errors, system errors, data errors, or format errors. Reporting errors can distort the project's budget reality, and can lead to wrong or misleading decisions, actions, or evaluations. To avoid or minimize reporting errors, you should use standardized and accurate reporting methods and tools, verify and validate your budget data and calculations, and review and revise your budget reports regularly.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?