October marks the start of the budget season. But why is budgeting so painful and why do we even need to do it? The answer is simple. While it takes time, budgeting is the number one way to control expenses.
Craig Andreas, Managing Partner at Nieto Technology Partners says “Excluding headcount, IT is often one of the costliest business expenses.”
The problem, of course, is that IT is not a revenue generator by itself; it’s pure expense. This makes it even more important to keep costs under control.
80% of IT managers don’t know what their expenses are. Often, paying bills is left to Accounting – therefore there is no visibility into everyday IT spend.
A case in point: Craig and the team helped a new telecom manager for a multi-million-dollar corporation identify $30,000 in unnecessary expenses within his first month on the job. The reason is that new department managers often don’t know what their predecessor established and inherit expenses for products and services they know nothing about.
“For businesses of all sizes, IT is often reactive rather than planned. This can cost a company more money than necessary in both the short and long term. We’ve seen it time and again.”
To get out of the reactive mode, auditing, planning and budgeting will help technology work for your business, support your growth goals and get your biggest return on your investment.
Steps to Planning Your IT Budget
- Identify Current Costs
Establish a big-picture baseline for what the company’s current spend is. Surprisingly, the smaller the company, the greater the spend on IT – up to 7%.
What do you currently pay for and what is really needed? Determine current usage and efficiency, then look for cheaper alternatives or eliminate if no longer needed. Determine if items have reached obsolescence and need replacement.
- Microsoft Office user accounts and add-ons
- 3rd party web hosting services
- Software seats / renewals
- Identify New Initiatives
Understand your business. What are the corporate goals or business initiatives set by management that require IT involvement?
- Office moves or expansion
- New technology
- Online presence or service delivery
- Budget Checklist
- Desktop support – Plan .5-1 hour per user per month for service
- Web and application support
- Software Licensing
- OS & applications
- Internet connectivity and WAN
- Desktops / laptops
- 3rd Party Vendors
- Support agreements
- Data acquisition
- Does it make sense against projected revenue?
- Communicate and get approval from management.
- Execute and stay aware of spend and make incremental adjustments as needed.
Ask the Expert – Budget for Small Business
Q: What if I’m a small business and my IT budget it $0?
A: Experts say the single most important thing a small business owner should budget for is “business continuity”. “If you don’t have backups, your computer goes down or your security is compromised, your small business could be crippled, causing loss of business, customers or even your livelihood.”