You are sitting before your computer with your spreadsheet on the screen. How do you begin? There are three main ways to come up with numbers for your budget.
Historical Approach
This approach bases the numbers on the cost of similar past work. If your unit is doing work that is essentially similar to that done year after year, this approach can work reasonably well. By estimating increased charges or costs, or additional staffing needs, you should be able to incorporate significant cost changes.
Task-Based Approach
The idea here is to take your plan, break it into the major tasks, estimate the cost of each task, and then add the costs to calculate the total. This is the best approach to estimate costs of a project that is completely new to your unit or your organization.
Combined Historical/Task-Based Approach
Here you combine the previously mentioned approaches. First, each approach is used to estimate the budget. Then the numbers are compared. If there are large cost differences, more analysis is required. Even when cost differences are minimal, it’s a good idea to compare the new efforts to past ones to identify any areas that might increase costs or allow savings.