While some businesses do not bother with budgets, they can be extremely worthwhile. Besides helping you manage costs, a budget can highlight areas where you might need to invest more resources. It can also keep you on track in meeting your financial goals.
8 Tips for Preparing Your IT Budget
Here are eight tips that can help you prepare an effective IT budget:
1. Take The Time
An IT budget is not something you can throw together in a day. It takes time and thought to create one that will help your company grow. It also requires input from your management team, as your IT systems are likely being used in many different areas of your business.
Further, an IT budget is not something you should file away and forget about once it is created. You should take time each month to check and update your budget as needed.
2. Look to the present and past to predict the future
A good way to begin your IT budget is to create a baseline budget that shows your IT expenses and income for the current year. You can then adjust it to account for anticipated changes for the upcoming year. Examining your IT budgets from previous years can give you an idea of how variable revenue and costs have fluctuated from month to month, quarter to quarter, and year to year.
3. Do not try to budget down to the last cent
IT budgets are designed to only estimate where money will be coming in and going out. They are not accounting ledgers, so you do not need to account for every last cent.
Because you are just estimating your IT expenses and revenue, do not be surprised if your projections are wrong. You can adjust them as needed when you review your budget each month.
You should always allow for unexpected expenditures as things change very quickly in the digital world. It may help to put aside a small percentage of your budgeted funds for unanticipated spend, whatever it may be.
4. Align your IT budget with your company’s strategic goals
IT systems can help or hinder a company’s efforts to meet its strategic goals. For example, meeting the goal of improving customer retention is more easily achievable with a fast, reliable web ordering system than a slow, quirky one. Budgeting IT improvements in areas that support your company’s strategic goals will help turn IT into a profit centre rather than a cost centre.
5. Budget for hardware and software updates and replacements
Many companies have outdated hardware and software because they do not keep track of when these resources should be updated or replaced. As a result, employees often use them until they fail. These failures can lead to many other problems, including lost productivity, security risks, and even system downtime.
A better approach is to use an asset management system to track when hardware and software need updates or are approaching the end of their life. That way, you can budget for upgrades and replacements. This will help you avoid the additional costs and hassles of dealing with failed hardware and software.
Keep in mind that migration to cloud services may well reduce costs, thanks to Cloud services offering predictable monthly or yearly payments, which often include automatic updates to the services included in the Cloud bundle.
6. Invest in measures that will improve security
It shouldn’t come as a surprise that cyber attacks are on the rise among Australian organisations, with cyber crime costing the Australian economy more than $1 billion per year.
A recent Accenture study found that 80% of Australian companies believe their cybersecurity investments are failing, which a 50% increase in breaches in Australia from 2018 to 2019.
Added to this, the global COVID-19 pandemic has changed the game of cybersecurity in many ways and has made it crucial for businesses to consistently and thoroughly review the performance of existing defences, systems and processes if they wish to stay protected amid a more treacherous threat landscape.
With the threat of cybercrime and cyber attacks increasing every year, it may be worth investing in new security measures to help protect your systems. These could range from anti-virus solutions and firewalls, to the use of a managed software services firm to help increase your company’s cyber security.
7. Do some calculations before treating cloud costs as operational expenses
A recent survey by research firm Telsyte is predicting that the Australian cloud market will surpass $1 billion in spending for the first time in 2020 , thanks to a COVID-19 era boost to the adoption of collaboration apps and high levels of spending on digital transformation.
Chances are your business is already budgeting for at least some cloud-based solutions. In budgets, companies often list these cloud costs as operational expenses so that they can increase or decrease them as needed. This gives companies more flexibility to meet financial goals. However, if you plan to use a cloud application for many years, it might be cheaper in the long run to treat the cloud costs as a fixed amortisation expense.
8. Do not postpone or cancel IT training to reduce costs
Training is a discretionary expense in budgets, so companies often schedule IT training later in the year. That way, if they need to reduce costs, they can simply delay or cancel the training and remove that cost from the budget. However, delaying or canceling IT training can lead to more problems down the road, especially if it is security-related training for employees.
Bonus IT Budget Tips
Tip One: View IT as an investment as well as a cost
Your IT Strategy and IT Budget should be contributing to the delivery of company goals, thus your IT spending should deliver a return on investment in the medium to long term.
Tip Two: Consult your employees
Your staff’s knowledge and experience can provide valuable insights into your spending priorities. Their understanding of your business priorities and objectives means they may well have a good understanding of where your IT budget should be spent.
If you need help with your business IT budget, and to get the most from your IT budget allocation for the coming financial year, contact Surety IT today.