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Setting Budgets

What are budgets

Budgets are the number of hours or dollars allocated to completing the work of a phase of a project. An Hours Budget is the time allowed for the ‘average’ staff member to complete the work. A Dollars Budget is the value of the time allowed to complete the work. The Dollar Budget is inherently more accurate because it takes into account who spent the time.

Why set budgets

The purpose of setting budgets is to make a profit by using up only the part of the fee that was allocated for doing the work. Whether you set a budget or not, the reality is that only so much of the fee can be used to do the work before you decrease your profit or incur a loss. You cannot manage what you don’t measure. You cannot assure profitability without knowing how much time or money is available to complete the work.

Who can set budgets

In the Ochre App, you need access to the Project Reports page to set budgets. That access is available to users with a Level 4 User Role.

Where do you set budgets

Budgets are set in the main table, Project Budget Progress, on the Project Reports page. By clicking in the Budget ($) or the Budget (Hrs) field for a project, you will see a pop-up where you can enter the budget amount.

How to calculate a budget

The budget for a particular project depends on several factors. In the case of a traditional design - bid - build project with Basic Services (AIA), this example will describe the process. You can use these tables to actually calculate a budget; however, your work will not be saved. Make a record with a screenshot or by printing the page.
First make the allocation of the gross fee among profit, consultants (if any), and other expenses that will be paid out of the fee. This will give you the net fee available to perform the work.
Fee Allocation
0
Gross Fee
Profit
Consultants
Other Direct Exp
->
Net Fee
1
$120,000.00
$20,000.00
$50,000.00
$5,000.00
$45,000.00
There are no rows in this table
Next break down the net fee into the phases of work. Name your phases. Assign its percent of the fee. At this point you have the dollar budget for each phase. The hours budget is a matter of dividing the dollar budget by the charge rate that you expect. This can be as simple as using 80-85% of your average billing rate. Or you can be more precise by using the next table, Staff Allocation.
Budget Calculator
0
Phase
Total Net Fee
Percent
Budget ($)
Charge Rate
Budget (Hrs)
1
SD
$45,000.00
15%
$6,750.00
$78.00
87
2
DD
$45,000.00
20%
$9,000.00
$84.00
107
3
CD
$45,000.00
40%
$18,000.00
$72.00
250
4
B
$45,000.00
5%
$2,250.00
$88.00
26
5
CA
$45,000.00
20%
$9,000.00
$66.00
136
There are no rows in this table
100%
Sum
List all the staff members that you expect to work on the project. List their charge rate. Then for each phase estimate what percent of all the hours will be contributed by each member. Take the sum of the contributions from each staff member and use it as the charge rate for that phase. Repeat for each phase.
Staff Allocation
0
Name
Charge Rate
Percent
->
Contribution
1
Staff A
$110.00
10%
$11.00
2
Staff b
$80.00
40%
$32.00
3
Staff C
$70.00
50%
$35.00
There are no rows in this table
100%
Sum
$78.00
Sum

The log of budget changes

From the Admin page of Ochre, you can access a log of all the changes that are made to budgets. This could be helpful if you are trying to recreate the history of the project. The log documents who, when and what change was made.
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