Cost Planning and Budgeting
Note
See the following video to follow a conversation between Linda and James about the budgeting of investment projects:Integration of Planned Costs and the Budget
Although you must estimate your project costs as accurately as possible during the planning phase, funds are actually allocated in the form of a budget in the approval phase. The budget is the approved cost framework for a project. It differs from the cost plan in that it is binding.
![A figure is shown explaining that cost planning is normally carried out before project budgeting and forms the basis for proposing and approving the budget. A figure is shown explaining that cost planning is normally carried out before project budgeting and forms the basis for proposing and approving the budget.](/service/media/topic/c1ccaebd-5874-47da-a21c-33efe255dce0/S49002_26_en-US_media/S49002_26_en-US_images/S4127_Budget_01.png)
Cost planning is normally carried out before project budgeting and forms the basis for proposing and approving the budget. Once the planning phase is completed, the project is approved and budgeted (i.e. assigned an original budget) by a decision-making committee. The project manager then distributes the budget to individual Work Breakdown Structure (WBS) elements at subordinate levels, according to the top-down principle.