Your IT budgeting cheat sheet
Given the ever-growing reliance and costs of IT services, planned IT spending should be part and parcel of every fiscal business budget. But it’s surprising how little some entrepreneurs regard financial planning. According to a report by Clutch, 50 percent of the surveyed businesses had no official formally documented budget in 2020. Some didn’t bother creating a budget at all.
Business IT is such a broad and dynamic field that careful planning is key to fully realizing its value. But it’s one thing to see the value in an IT budget and another actually to create one. To get you started, here are five quick tricks for drafting a realistic IT budget.
Take your time when planning the budget
IT budgeting is not just about numbers and figures; it’s also about planning out your IT approach. It informs your IT decision and opens your eyes to new cost-saving possibilities. For example, hiring a managed services provider, migrating to the cloud, and digitizing more business processes. Since IT planning touches nearly all aspects of businesses, it’s not to be taken lightly.
Take your time and put in the extra effort to get the IT budget just right. Do your homework — research cost optimization techniques and review previous budgets for deeper insight. Also, encourage all departments in the organization to share their thoughts on the proposed budget throughout the drafting process.
Break down and track your IT spending
Assess your entire IT infrastructure and categorize all IT-related costs into fixed, variable, and periodic expenses. Essentially, find out what it takes to keep the digital estate up and running. And don’t forget to run the numbers for any expected changes to the IT infrastructure within the budgeted period. The main costs you’ll want to consider are:
- Support and maintenance (both in-house and managed services)
- Cloud services and data management
- Ongoing and upcoming projects — any new hardware, software, service, or labor deployments
- Periodic updates and upgrades
- Labor-related expenses
- Facility relocation
- Cybersecurity
Understanding these cash flows will help you create a comprehensive budget without leaving out any obligations. Plus, it becomes easier to make a priority list once all the cards are on the table.
Make adjustments where necessary
A third of the businesses surveyed in the 2021 State of IT study expected IT spend to increase over the next year. To cope with pandemic-related challenges, many companies are planning and actively deploying transformative, long-term IT changes. These will have a significant impact on IT budgeting.
The point is, technological change is inevitable, more so in the post-pandemic business environment. Ensure you anticipate and plan for these transitions in your IT budget. While you trade in the present, don’t forget to prepare your business for the future. Common digital transformations that might affect your IT budget include:
- Migrating to the cloud
- Staff training and upskilling
- Switching from in-house to managed services
- Setting up remote work infrastructure
- Reinforcing cybersecurity
Align your IT budget with the company’s mission
IT budgeting is all for nothing if none of the proposals align with your IT and business goals. Make sure your IT strategy supports current and future efforts to achieve set objectives. For instance, if you’re targeting specific security levels or compliance standards, your IT budget should reflect that by prioritizing cybersecurity functions.
Set aside an emergency fund
Even with diligent planning, you can’t completely rule out unforeseen circumstances down the road. Set aside a bit of extra cash in an emergency stash to sort out surprises and miscellaneous expenses. An emergency fund also comes in handy to cushion inevitable budget overruns and unrealized revenue projections.
Remember, drafting an IT budget is not the end of IT planning. You have to stick to the budget and follow up on IT spending closely. Ensure that every penny goes toward its intended purpose. Only then can you realize your IT investment’s true ROI.
Let KME’s professional experts help you optimize IT costs. We give businesses an upper hand in IT strategizing. We’re able to help your business through IT consulting, fully managed and co-managed IT, cybersecurity services, IT project management, and more. Contact us to get started.
