As the next budgetary year rolls around, thousands of IT managers around the world face the same problem: How can they get the money they need to keep their departments running smoothly and hopefully take on a new project or two for the following year?
Proper IT budget planning is the key to your success. An IT budget lists the funds that you need for the technology and human resources that you plan on using that year. This includes not just project-based funding but also regular ongoing IT costs.
Your budget is probably the most important document you'll work on all year. It's your ticket to smooth operations for the next 12 months. By asking for these itemised funds up front, you'll attempt to get approval for a collection of things at once rather than having to beg financial sponsors for individual elements throughout the next year.
With this in mind, there are some best practices that you should follow when creating this year's budget.
Have a starting point.
You can't plan where you're going properly if you don't know where you are. You need a baseline of existing costs on which to build your new budget.
Your expenditure constantly evolves, meaning that you need to document costs throughout the year and see how closely they track the last year's budget. Pay special attention to unplanned purchases and new recurring costs. Use it all when planning the next year's expenditure.
Use it as a strategy tool.
Your budget shouldn't just be a shopping list. It's a tool to help you understand where you want to invest your funds in the coming year and why. Use it as an opportunity to prioritise, putting the most important elements at the top.
Make a point of aligning your budgetary choices to business goals, which you learn about by meeting with line of business managers. This will also help you create strong alliances and garner support for your budget when you eventually present it.
Make it appealing for financial controllers.
It isn't enough to come up with a selection of line items. You have to make the budget palatable. This involves explaining your choices in plain English that non-techies can understand. Help make the financial case for your budget choices by justifying them with useful evidence, such as ROI predictions.
Make the whole thing more digestible by not asking for everything up front. Projects will start throughout the year, so a calendar of spending can help financial executives see how they can preserve working capital until it's needed rather than footing the whole bill up front.
Constantly review vendors.
Talking of calendars, you can use yours to your advantage when finding areas of the budget to tighten up. This is an important part of the budgeting process so you can prove to executives that you're taking efficiency measures.
Schedule vendor assessments throughout the year that precede the end of your contracts by a decent period. This puts you in a good position to find better deals. Source advice from neutral consulting companies and channel partners to help you with this.
Finally, don't leave your IT budget until the last minute. It should be clear by now that a well-honed budget takes a great deal of planning. By starting at least three months before it's due, you give yourself time to handle all of the above tasks.
Here's a budget structure that you can adapt and use as the basis for your own budget document. Notice that we separate out capital and operating expenses, as this gives the financial controller a better idea of what they need to put on the balance sheet as opposed to the profit and loss sheet, which carries implications for working capital, depreciation, and the ability to raise debt.
One option is to use a version of this list for regular operations and separately for individual projects, combining them in the same document so that financial executives can understand the underlying costs for each proposed project.
- Capital Expenses
- Hardware (further broken into networking, servers, storage, desktops, and mobile devices).
- Operating Expenses
- Staff and compensation
- Internal hires (including bonuses and employee benefits)
- IT Services
- Outsourcing costs
- Online services
- Software subscriptions
- IT Support and maintenance contracts
- Travel (broken further into automobile costs, other transportation, and accommodation).
- Office supplies and equipment