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Agile Budgeting

Aaron Shishler 8 min read
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Agile is an innovative approach to project management that’s often used in the software development world. The practice helps keep complex projects on track by keeping teams focused on the end goal while at same time allowing for flexibility. This methodology can be applied to almost every aspect of project management, including budgeting. But what does Agile budgeting mean, and how can the Agile budgeting process benefit your projects?

In this guide, you’ll learn all about Agile budget management, how to employ the practice, and how revitalizing your approach to budgeting can help your teams achieve their goals more easily. You’ll also discover an Agile budget template you can use as a starting point for your projects.

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What is Agile budgeting?

Agile budgeting means applying Agile’s principles to your budget. In traditional waterfall budgeting, you set your budget in advance, and it’s fixed for the project. If the scope or timeline changes, or if you run into unexpected challenges, you’re limited in terms of how you can respond and allocate resources.

When you employ Agile budget management, you review your budget frequently and have more flexibility in terms of how resources are allocated. This empowers your team to respond to changing project conditions and means you’ll be alerted to any potential issues more quickly.

Why is budgeting critical to project management?

Budgeting is a key component of project management. Having a clear idea of what your project’s budget is helps you manage other variables, such as staffing, timelines, and the allocation of other resources. A good project plan will include the following elements:

  • Communication
  • Resources (including staff, physical assets, and cash)
  • Timelines
  • Workflow

All of these elements are connected with one another. For example, shorten your timeline, and you may need more staff in order to meet your deadline. Hire more staff, and you may need to change the way people communicate. You may also need to alter your workflow to account for different milestone deadlines. Unforeseen events such as supply chain issues could also have an unexpected impact on your workflow and expenditure.

As you’re evaluating the progress of any project, budget is likely to be one of the main KPIs you’ll use in your assessments. With a traditional budget, you’re limited in terms of how you can respond to unexpected events. Agile budget management is more flexible and gives you the freedom to change your spending in response to changing market conditions or project demands. But how can you implement this practice in your projects?

Tips for Agile budgeting

If you’re not familiar with the Agile methodology, you might find the Agile budgeting process slightly intimidating at first. Once you become familiar with how it works, however, you’ll see that “flexible” isn’t the same as “ad hoc.” When employed correctly, Agile budgeting helps you stay well-informed about your projects and gives you the control you need to stay within your budget over the duration of the project. Here are three considerations to help you effectively employ Agile budgeting:

1. Align your budget sprints with your development sprints

Agile development uses a series of sprints with a review process between each one. Your Agile budgeting process will also use a series of sprints. Align these sprints with each other and review your budget as the project progresses. This way, you’ll always know where you stand and whether you need to pivot in response to delays, scope changes, or other issues.

2. Be willing to respond to changing conditions

The value of Agile comes from being able to review the progress of your project regularly and make changes when needed. With a waterfall process, once you’ve started work it can be hard to change your approach, and you may not find out there’s an issue to address until a project is too far along to respond.

Agile budget management gives you the opportunity to make changes far more frequently. It also gives you the information you need to be aware of with respect to necessary changes. Of course, it’s still your responsibility to act on that information.

3. Clear communication is key

Throughout the entire process, clear communication is essential. It’s important to communicate with the client at the beginning of the project when you’re understanding user stories and mapping out requirements, and as the project progresses. It’s also important to communicate with your team so you can understand the challenges they’re facing and how they feel about the progress of the project. Whether you’re working on a fixed-price project or one that’s more flexible, you need to manage expectations in the early stages and work with the client to ensure things stay on track.

Benefits and limitations of Agile budgeting

Agile budgeting is a powerful tool that can be applied to most projects, and it shares most of the benefits of Agile, as well as having its own clear use-cases:

  • Tying the budget to the sprint helps keep the budget aligned to the timeline and scope of the project.
  • Agile budgeting can make quarterly reporting easier, since budgets are divided into smaller time periods.
  • Budgets can be adjusted regularly, so if some segments come in under budget, you have more room to maneuver during more difficult periods.
  • When the budget is discussed regularly and team members are kept informed, the team feels like they have a stake in the budget, and they understand the resources available to them more clearly.

However, there are some limitations to Agile budgeting:

  • The lack of a single budget owner may complicate matters in teams that aren’t used to Agile approaches.
  • Agile budgeting doesn’t change the budget available, so while it can reduce waste and mitigate some problems, it won’t magically solve issues caused by a budget being too small.

Waterfall approach vs. Agile budgeting

The waterfall approach to budgeting is a top-down approach where the budget is fixed at the start of the process, based on assumptions about the scope, timeline, and workflow of the process. The opportunities to review the budget in a waterfall system are limited. Agile budgeting offers more chances to assess how the project is progressing and make changes to the budget (and other aspects of the project) at the end of each sprint. These frequent reviews and increased flexibility are the key benefits of Agile budgeting, and using the Budget Tracker Template can help you get started with this approach.

Using to keep efforts on track and on budget

The Work OS offers a wealth of tools for project management, planning, and tracking. Many of these tools lend themselves to Agile environments. The Agile budget template is designed to help you understand the Agile budgeting process, providing you with cues to work through during each review. Project managers, sprint owners, and other stakeholders can use the template to assess the budget, share information, and communicate more effectively. The template can be used alongside other charts, reporting tools, and templates to give you an at-a-glance overview of the status of your project. Use’s tools to streamline your project management and benefit from having everything you need to know about your teams and projects just a few mouse clicks away.

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Does Agile work for fixed budgets?

There’s a common misconception that Agile doesn’t work for fixed-budget projects. There are some challenges when it comes to implementing Agile practices in projects with a fixed budget. However, employing this methodology can help project leaders plan around the areas of the project that are more flexible, such as the scope, increasing the chances of on-time and on-budget delivery.

How is budgeting done in Agile?

In Agile budgeting, the budget itself has sprints that align with the project sprints. At the end of each sprint, the budget is reviewed, and key team members provide their input into the budget for the next sprint. This gives teams regular insights into whether the project is on track both practically and financially, and offers the opportunity to pivot if needed.

What is Agile budgeting?

The Agile budgeting process is a way of making budgets more flexible by using regular reviews that line up with your project sprints. By re-evaluating the budget and adjusting it as necessary, your team has more control over its spending and resource usage. Agile budget management can also assist with quarterly reporting.

Agile budgeting helps you respond to change

Agile budgeting is a versatile tool that helps you understand your project’s finances and manage your resources more effectively. It can be applied to many different projects. If you’re not sure where to begin, take a look at the Agile budget template for some suggestions.

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