Project Portfolio Budgeting v.2

Requires the following solutions to be installed:

• Financial Management Structure (9c449c94-fdea-418b-8d0a-9606aa3491c4)

It has to be extended by the following solution:

• Proposed Budget based on Work Allocations (b82de5e7-4b6e-48b0-aa7c-c533d423711a)

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Solution Overview

Project Portfolio Budgeting solution is designed to support Portfolio Stakeholders and Project Managers in the activities related to portfolio investment planning, funding portfolio epics (or projects), and tracking actual labor and non-labor expenses through the months, quarters, and years.  

There are the following phases of a budgeting process:

• Budget Target - describes the company's initial idea of distributing funds across Portfolios and defining guardrails (Run vs Grow, CapEx vs OpEx).
• Budget Proposal - describes budgets proposed by Project Managers or Initiative Owners based on the funds needed to implement Projects, Initiatives, or Portfolio Epics.
• Budget Approval - comparing the numbers in a Budget Target and Budget Proposal reflects the final decision on the investment into each Portfolio.
• Actuals - shares information about labor and non-labor expenses related to a Portfolio.

While every company process slightly differs from another, all the activities fit one of these processes. The Budgeting solution enables a possibility to perform any of the mentioned above steps right in Targetprocess.

Please check the Project Portfolio Budgeting solution video to see it in action.

Solution Structure and Configuration

The solution enables connection of Budgets, Costs and Expenses to Portfolios and Portfolio Epics, allowing to fund Portfolios and then Portfolio Epics, as well as track actuals for them.

Generate Budgets for Portfolio and Portfolio Epics

To track information about budgets and costs each Portfolio and Portfolio Epic should have a structure of Budgets (to keep the totals across all the Years), Annual Budgets, Quarterly Budgets and Monthly Budgets (to track the data for each Year, Quarter and Month respectively). So, the first step is to generate this budgeting structure.

To make budgeting information available to a limited group of people, we need to hide Budgets in a separate Portfolio (Project) called Budgeting (or use any other name which suits your organization). All the Budgets, Costs and Expenses will be kept in this project by default. By assigning people to this project, you will provide access to the budgeting details. People who don't have access to the Budgeting Portfolio (Project) won't see anything on the Budgeting tab at Portfolio or Portfolio Epic views. To do that:

• Copy a "Budgeting" portfolio ID
• Go to Settings -> Automation Rules
• Replace the value for the Budgeting Project Id parameter in the following rules:
  • Create Budgets when any Resource is created/updated
  • Delete Budgets when any Resource is deleted
  • Start Budgets creation when "Generate Budgets" is pushed
  • Create hierarchy from parent Budgets (1)
  • Create hierarchy from parent Budgets (2)
  • Create hierarchy from parent Budgets (3)
  • Manually delete Portfolio with Budgets
• Save the rules

Now we need to generate a structure of Budgets for Portfolios and Portfolio Epics (Projects). To do that:

• Open Project Portfolio Budgeting -> Administration -> Generate Budgets for Years view in the left menu
• Click the "Generate Budgets" checkbox on a Year you need to generate Budgets for.

Annual, Quarterly, and Monthly Budgets will be created for all existing Portfolios and Portfolio Epics.

Note 1: Do not click "Generate Budgets" for two or more years at the same time,  please, wait till budgets will be generated for one selected year and then click "Generate Budgets" for the next year.

Note 2: When a new Portfolio or a Portfolio Epic is created, Budgets will be created automatically for the current year and future years for which Budgets have already been generated.

Note 3: The levels for which you'd like to enable the Budgeting solution are configurable. Please get in touch with us if you'd like to implement it for different work entity types.

You will see the generated Budgets for Portfolios and Portfolio Epics on all the other views in the Project Portfolio Budgeting folder. In case you don't see it. Open a view or a dashboard, go to Actions -> Setup view or dashboard and select all the Portfolios to be visible on a view:

Solution Flow

Step 1: Budget Target

Budget Target describes the company's initial idea of distributing funds across Portfolios and further between Portfolio Epics. It’s done based on the company vision and strategy for the following year's top-down. It answers the following questions:

• How much do we plan to invest in each Portfolio?
• How will this be distributed across Portfolio Epics?

Budget targeting is usually performed by Portfolio Owners and their main goal at this point is to split the Target Budget across different Portfolios as well as define guardrails and set what percentage of capitalization we should be heading to, as well as what will be the grow and run targets.

Planning will be handled by Portfolio Owners on the Portfolio Targets view, where you enter a Target Budget for a Portfolio and then for each Portfolio Epic.

Target CapEx and Opex (Percentage) define a desired capitalizable and non-capitalizable expenses. Target Grow and Run (Percentage) – desired Run vs Grow expenses percentage on a Portfolio or Portfolio Epic (Project). 

Target Budget In Scope for Portfolio is a sum of Portfolio Epic (Project) Target Budgets. It's used to see if we distributed the total Portfolio Budgets properly and didn't over or under-plan it. It will be highlighted in red if the sum of Portfolio Epics Target Budget will be more than a Portfolio Target Budget, meaning we have planed to distribute more funds than available.

We can also enter the numbers on a Portfolio Annual Budget detailed view -> Budgeting tab:

Portfolio Epic Owners will see and can update the information about Target Budget of a specific Portfolio Epic on a Portfolio Epic view -> Budgeting tab as well as on Portfolio Epic Annual Budget views.

Step 2: Budget Proposal

Budget Proposal is provided by Portfolio Epic Owners or Project Managers and provides information on how much funds are needed to implement a Portfolio Epic in the upcoming Year.

 It answers the following questions:

• What resources are needed to implement a Portfolio Epic?
• What are the necessary funds?
• How does this sum up into each Portfolio?

There can be different ways of calculating a Proposed Budget for a Portfolio Epic: based on User and Team Work Allocation, Portfolio Epic estimates, or other parameters (using additional solutions), or manually entered in this solution if the numbers come from another system or are approximately guessed by Portfolio Epic Owners.

Proposed Budget consists of a Proposed Labor Budget (based on User and Teams Work Allocations) and a Proposed Non Labor Budget (defines expected non-labor expenses, such as Software, Hardware, etc).

Budget Proposal - Labor

Proposed Labor Budget usually reflects how much money is needed for labor expenses. The suggested solution is Proposed Budget based on Work Allocations (b82de5e7-4b6e-48b0-aa7c-c533d423711a), where Project Managers would create User and Team Work Allocations, defining the needed people and teams for a project, desired period of time and percentage.

Calculated Hours and Costs will be distributed across Portfolio Epic Monthly Budgets and roll up to Quarterly and Annual Budgets. Thus, we'll se the Proposed Labor Budget on an Portfolio Epic Annual Budget.

Budget Proposal - Non-Labor

 Proposed Non Labor Budget will be formed based on Expenses Proposed amount. You'll create the estimated Non-Labor Expenses, defining what amount is needed. The Expenses will be connected to the respective Years and be shown as a total Annual Proposed Non Labor Budget.

Step 3: Budget Approval

Budget Approval - across Portfolios

From Portfolio Epics the Proposed Budget will be rolled up into Annual Portfolio Budgets. Comparing Target Budget and Proposed Budget for each Portfolio, Portfolio Owners decide if they are going to go with the initial Target Budget or increase/decrease it and approve Portfolio Labor and Non-Labor Budget.

There can be a situation where a Portfolio Epics Proposed Budget is much higher than a Portfolio Target Budget. Portfolio Owner needs to decide whether we are going to go with the suggested scope and increase a Portfolio Budget or decrease the scope by removing some Portfolio Epics from the scope.

Budget Approval - within a Portfolio

When a Portfolio Budget is approved, Portfolio Owners together with Portfolio Epic Owners (Project Managers) need to decide on how to distribute the Approved Budget across Portfolio Epics within it. To fit the Approved Portfolio Budget, we can reallocated people, update their allocation percentage or decrease the scope of work in a Portfolio Epic for the upcoming Year.

On a Portfolio Epic Budgeting view you can check whether Target Portfolio Guardrails  match the planned Portfolio Epics CapEx/OpEx and Run/Grow parameters.

Step 4: Actuals

Actual Costs can be calculated based on Hours spent doing work and people rates, imported from a financial system or entered manually. They will be represented as Costs. The Costs will be split to CapEx/OpEx and Run/Grow, so that we could see aggregated by each category expenses for a Portfolio Epic and a Portfolio.

For the Expenses, you'll enter Actuals, which also will be split by the mentioned above categories.

The total Actuals will be aggregated for each Portfolio Epic and a Portfolio by Month, Quarter, and Year.