Going over budget in a project reflects very poorly on the manager. It usually occurs when the manager has poor planning skills. The manager has very limited options in this case. In order to finish the project without going budget, the manager has to either reassign resources to a a lower cost resource. However, this has its drawbacks. The project will take longer to finish, so the manager has to compromise on its promised delivery date. Another way is to reduce the project's scope to deliver the project on time with less of a budget. If both of these are not feasible, then obtaining extra funding is the only valid option. At the start of a project it is worth identifying what type of issues could increase budget, and clearly state the assumptions that you are working off. This provides you with a basis to inform clients of increase workload, and it will make it easier to convince your investors in providing more money. 

I believe that the answer to this question varies depending on the situation. It could be possible that the manager had done some poor planning for the project, like @hodafattel mentioned, but it could also be a situation where things just went wrong during one stage of the project. Let's use testing for an example. Whenever planning a project that requires some kind of testing or trial to be completed before it can be approved for the market, it is imperative that the manager anticipates multiple failures and repeated testing before getting said approval, and allocate for such measures in the budget. However, no one can ever be certain how many trials are necessary to reach a conclusion, so there can definitely be instances where testing uses up more of the budget than initially planned. In a scenario such as this, while may be possible to adjust resources to complete the project within the budget, it is definitely not a preferred route as the end product may not end up meeting the expected standard. Thus, if I were in this situation, I would put in a request to have the budget for the project increased, explaining the series of events that led to this request and why the increased funding is the better route to take for the best quality product.

As previously mentioned there isn't exactly one answer to this problem. One of the factors that I would consider is the importance of the project. Is this project a precursor to  another project or a series of projects? Is this project a deliverable to a customer where the promised completion date is made to an external party rather than an internal party? If the project is of utmost importance than yes the budget should be increased but a restructuring of the initial project plan should be considered as it currently has not worked out for any number of reasons. If the project is important but is not critically important for another 6 months resources can possibly be spread wider so that  people can still make progress on the over-budget project while also getting started on new tasks as to not slow down the pipeline of work.

Finally, only completing 65% of the project on the initial budget is a gross underestimation, either in the amount of money need or the project timeline. Either way, this should be  looked at on its on so that it does not become a pervasive problem

Depending on the company they may have additional financial reserves to tap into for situations like this or you may be lucky enough that another project was under budget and can transfer their funds to you. Though it is beneficial to stay out of this situation all together as it reflects poorly on the project manager that the finances were not properly gauged and it took 65% of the project completion to identify this. It is important to constantly be monitoring budgets so such issues can be identified early on and resources can be reallocated accordingly as to not go over budget or impact timelines negatively. Otherwise, the deliverables and scope of the project altogether will have to be decreased in order to stay within budget which may or may not provide the financial results the project initially intended for. 

This is a situation I would not like to find myself in because it shows that my managing skills were not good, to say the least. Terminating the project at 65% completion would be a waste of money, so the better option would be to do our best to finish with a final budget less than what we would have lost. Say the budget was $100, at this point $65 would be wasted. Finishing with a total of less than $165 would be preferred. To make this happen, I would extend our timeline and submit a request to the company for extra funding. In the meantime, cutting some areas would help too. Overall, I think this would be challenging but I’m sure it’s something many companies have seen before. Perhaps they would know the best way to proceed.

A crucial part of project planning would be the budget allowed for the team. The budget will never be perfectly accurate as there can be some overestimates and underestimates, but you always want to try to shoot to be under budget rather than over budget. Needing more funding than what is currently available for a project can reflect badly on not only the project manager but the team as a whole. Depending on the urgency that the project has, going over budget will mean putting it on hold while extra funds are being managed or having to reallocate money from another place to support this current project. There are many different solutions that can help solve the issue of going over budget and again that will have to do with the importance of the project, whether or not the company has funds in another place, and the effective planning and communication of the project manager with the team. Changes in the planning process may need to be made including the timeline and other deadlines especially if they are money sensitive. It is important to come up with solutions to this issue beforehand in any risk assessment that the team does since this will introduce a risk to the completion of the project. 

Posted by: @rajamharrison

Imagine you are the lead of a project, and you notice that your team is on track to be over budget and the project is only 65% finished.  Is there a way to to finish this project without going over budget? If so, how would you propose doing that? If not, how would you go about getting the extra funding needed to bring this project to completion? 

When realizing you are over budget, the first step to do is stop and speak to the team to make sure everyone understands what they will be facing. Once everyone understands we are on a path to go over budget, I will tell them to be very careful with the materials in use because every cent adds up. Also, I would personally put in some of my own money and will not require any team members to do so, but it is not required. If the teammates believe in the project, I don't see why they wouldn't invest in it to ensure the company is successful. I agree with tgt6 about the budget, and one must understand the budget before even going into the project. Still, problems always occur due to Murphy's law, so one must prepare themselves for the worst when handling projects. 

I believe going over budget on a project is subject to management approval, though this does not look great on for the team. You will need to prove to management that this project is worth the extra money with a thorough budgeting plan. I would stress to management how important it is to add to the budget, as well as cut costs for details that aren't a necessity. 

@ma818 Totally agree...ultimately we will have to prove the company that the extension of budget is worth it considering the profit. Otherwise, I agree with others that cutting on remaining budget by changing to cheaper resources will help. Also, we can cut cost from other projects or future projects if possible. For those projects, we will then have to start out with a lower budget and be more cautious and not let this happen again.  

I think we can all agree that this is a very tough situation to be in as a project manager and will ultimately reflect poorly on the PM's ability to plan and allocate funds. However, rather than scrapping the project there are many ways to go about it to fix the issue. The first of which is to conduct a cost analysis of the remaining 35% of the project to see if there is any way to allocate the funds in a way to be able to finish the project without having to ask for more money. This is pretty difficult way to fix the issue as in the case of materials it would be hard to spend less money unless you got the materials from a different source. In some cases the company might not want you to switch the source of materials as they may have a trusting relationship with another company. I think the better solution is to sit down with the team and stakeholders to try and obtain more funds or explore other options of funding from other groups.

While this is an extremely difficult situation to be in as a project manager, there are still many options that could be explored to complete the project without exceeding the budget. However, it is crucial that immediate action is taken to address the situation. The first step in solving this issue would be to conduct a detailed budget analysis for the rest of the project. To do so, a thorough review of the project's budget must be conducted to identify where the overruns are occurring and understand the root causes of the budgetary issues. Now that the root cause of the budgetary issue has been identified, it is beneficial to analyze resource utilization and identify opportunities to optimize resource allocation. In this case, staffing levels and manpower can be reallocated, or cross-functional teams can be leveraged to maximize efficiency and productivity without incurring additional costs. Next, it is important to reevaluate the projects scope and overall priorities. In this step, any non-essential tasks can be determined and either scaled back or deferred to reduce costs. Reassessing the project scope can also help focus the last of the resources on critical components of the project. Lastly, it is imperative to communicate with the stakeholders of the project. Not only can they help with evaluating the resources of the project, but they can also provide support in implementing cost-saving measures and managing expectations regarding project timelines and deliverables.

Project managers should be wary of exceeding budgets as they might be a sign of inadequate preparation and damage to their reputation. The manager can minimize the project's scope or reallocate resources to less expensive alternatives to prevent this. If these aren't workable, more money needs to be obtained. It's critical to notify stakeholders of assumptions and spot possible budget problems early. Regular budget monitoring is necessary to reallocate resources and prevent unfavorable effects. When faced with such a scenario, the goal should be to complete the project within a final budget that is smaller than the possible loss through strategic cost-cutting, funding requests, and timeframe extensions. Getting advice from knowledgeable stakeholders or coworkers might be helpful in choosing the best course of action.

While many have said that the project being over budget is poor planning, the lectures did indicate that there are situations where the budget in the planning stage is not accurate because many differences such as additional clinical research or animal studies can cause the budget to increase significantly. In certain situations, the sponsors can allow for this increase because they have been updated with the budget requests throughout the project timeline. However, if the required budget is extreme then the sponsors may elect to shut down the project even though it is 65% completed, this is not an impossibility. Even though in many cases project budget can be due to poor planning, there are also possibilities of unseen circumstances that can cause the required budget to increase significantly, the decision to keep the project going or not comes down to the sponsors and whether they see the value of continuing.