|Top 10 Tips For Your IT Budgeting |
IT Budgeting is the process of allocating monetary resources to various IT expenses. These expenses could range from recurring expenses like cloud services, hardware leases, IT support agreements, and staffing to expenses dedicated to a fixed-duration project or initiative. In some companies this is primarily an annual exercise, while other companies might demand budgets for each initiative as it arises.
While IT budgets are usually developed and presented by IT managers, everyone from department heads to 3rd party IT providers could have a say as to what goes into the budget.
The activities your employees and consultants will be engaging in during the year are defined by the budget, so it’s a critical document for taking your priorities from concept through execution.
Tip 1 – Your IT Budget should be a manifestation of your IT plan.
Business leaders should be able to look at your IT plan and your IT budget, and see how the 2 go hand in hand. Your IT plan should lay out the reasons why you need particular expenses. And your IT budget should clearly lay out the expenses that are mapped out to the plan.
Tip 2 – Remember, if you don’t ask for the budget, you probably won’t get it.
IT projects won’t receive funding if you don’t include it in your budgeting. This requires some forethought on your part to think about what you need in an upcoming year.
Tip 3 – Start by reviewing your IT budget and expenses from the previous year.
Make sure to capture all recurring costs like Internet service, phone service, support/maintenance agreements, warranties, cloud services (don’t forget to include cloud services from specific departments like Sales, Marketing, Accounting, and HR), etc. Also include recurring services from IT vendors.
Tip 4 – Have a technology refresh plan.
Check our guidelines for technology refresh from our August 2017 newsletter to see how often you should refresh laptops, PCs, servers, printers, firewalls, and other technology.
Tip 5 – Involve your CFO to determine the best method to purchase IT needs. (capex or opex)
Traditionally many IT expense were capital expenses that had to be capitalized and amortized over 5 or 7 years. Most cloud services are consider operational expenses, meaning that the full cost of the expense is written off as an expense each month. Leases, depending on how they are structured, can be categorized as either capital or operating leases. Another consideration is Section 179, which allows small businesses to write off up to $500K of capital expenses in one year, instead of amortized over multiple years.
Tip 6 – Prioritize your budget.
Recurring expenses that are non-negotiable need to be listed as REQUIRED on your budget. From there, typically you would want to have at least 3 levels of priorities. Priority 1 should be the things that are no-brainers to do (such as technology refreshes on a regular schedule) plus IT projects that have a positive ROI (return on investment) or are required for another reason (such as compliance). Priority 2 should be the things that will help grow the business potentially, or make IT management easier and more effective. Priority 3 should be your wishlist; these items might become Priority 1 or 2 in the future.
Tip 7 – Don’t forget to include training in your budget.
Training is usually a discretionary expense, so it’s one of the things that could potentially cut from the budget during the year. But try to include sufficient training in the budget, as delaying or cancelling training can be highly detrimental.
Tip 8 – Avoid these mistakes:
When evaluating cloud services, take a long-term view of the TCO (total cost of ownership). Don’t forget to invest in multiple tiers of storage (fast storage for databases, typical storage for files, lots of large but slower storage for backups). While it may be OK to try and stretch technology such as laptops and servers, stretching too far can cause decreases in productivity and employee morale.
Tip 9 – Budget for the unforeseen problems.
Rarely does an organization go through the year without problems and outages. Keeping some excess budget for spare equipment, unexpected consulting services, and other unforeseen needs can help you avoid dipping into your budget in other areas.
Tip 10 – Don’t underbudget for IT Security.
Cybersecurity threats continue to increase at a rapid pace. And the costs for IT security continue to increase. New threats mean that we need new tools to protect us. Assess and inventory your current IT security resources. Having a multi-layered approach to security is best practice, but don’t forget to budget some consulting dollars to help with IT security policy development. And, finally, make sure that you budget for tools to measure the effectiveness of your IT security systems.
Reach out to us or contact your Fulcrum Group Account Manager to learn more about how best to tailor your IT budget.