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Are you a business looking to create an effective IT budget?
In today's ever-changing technological landscape, it can be difficult to accurately allocate funds in order to ensure optimal results.
But don't worry - there are tried and true ways for CEOs, CFOs, and CTOs alike to make informed decisions about their organisation's technology spending.
By following the steps outlined in this blog post, you'll have a well-rounded IT budget that will meet your needs now and into the future.
So, let's get started with how to create an IT budget!
Creating an IT budget may seem daunting at first, but with proper planning, it can be a relatively straightforward process.
A well-crafted IT budget allocates resources to ensure that technology initiatives are aligned with business goals while also managing costs.
Creating an IT Budget
IT has the potential to be the most considerable expenditure for any business, so having a watertight IT budget can help control costs, and you keep your profit margins safe.
To help you create the ideal IT budget, here are the 10 detailed steps involved in creating an IT budget:
- Identify Your Goals
- Audit Your Past and Present IT Budgets
- Estimate Your Costs
- Compare Your IT Spend with Competitors
- Analyse Your Existing Technology
- Research Vendors and Solutions
- Create a Budget Plan
- Monitor Spending
- Communicate With Other Teams
- Adjust Your Budget as Needed
Now, let’s explore each step to create an IT budget in detail:
Step 1: Identify Your Goals
The first step to creating an IT budget is to identify your business goals. This will help you determine what type of technology investments you need to make in order to achieve those goals.
Consider the needs of your organisation, such as increased productivity, improved customer service, or better data security. Once you have identified your goals, you can begin to create a budget that meets those needs.
Step 2: Audit your Past and Present IT Budgets
Review your past and present budgets and use them as a guide to create your next IT budget base. You can break this section up into three parts.
1. Make a note of your recurring costs.
Knowing your recurring costs and setting aside a lump sum of money for them will ensure you have always budgeted enough money to cover expenses you know will definitely occur.
2. Review unexpected costs
Are there trends in your unexpected costs? Are you regularly caught out by equipment breaking or new starters joining the business?
If your unexpected costs follow a trend, we recommend investigating these situations and working with the relevant people to best prepare for the cases to arise again.
This may include auditing your hardware and noting when equipment will need upgrading or speaking to heads of departments and HR to find out if anyone plans on hiring in new staff over the next 12-month period (we recommend budgeting for at least 12-months at a time).
3. Record where you spent money
Knowing where your last budget went is essential to ensure you are not allocating too much or too little spend on projects.
Also, this will help you keep track of new equipment/hardware/software to ensure you do not rebuy items you already have.
Step 3: Estimate Your Costs
The next step is to estimate the costs associated with achieving your IT goals. This includes both one-time and recurring costs, such as hardware purchases, software licenses, and maintenance fees.
It’s important to get accurate estimates for each item in order to accurately calculate the total cost of achieving your IT goals.
Knowing where your last budget went is essential to ensure you are not allocating too much or too little to spend on projects.
Also, this will help you keep track of new equipment/hardware/software to ensure you do not rebuy items you already have.
Step 4: Compare Your IT Spend with Competitors
To ensure you remain competitive, you should compare your IT spending to your competition.
You should research what other businesses in your industry are spending and other companies of a similar size.
If your business goals are to grow, we also recommend looking into the expenditures of businesses similar to your organisation's goal size.
Step 5: Analyse Your Existing Technology
Once you have identified and estimated the costs associated with achieving your IT goals, it’s time to analyse your existing technology infrastructure.
Take stock of what you already have and consider whether any of it can be reused or repurposed in order to save money on new purchases or upgrades.
Audit all current hardware and software to ensure you know what exactly you have.
Use this time to note when equipment and software need upgrading.
Licences and software will need upgrading regularly, and the supplier usually determines this, so check your contracts to ensure you know when the renewals are due.
Upgrading hardware is usually done at your discretion. This will depend on what the item is used for, who by, and its purpose.
Using outdated hardware can reduce productivity and can also cause security vulnerabilities.
Knowing when things need to be updated and upgraded means you can start the process before it's due, which will help you spread out the cost.
Step 6: Research Vendors and Solutions
Now that you know what type of technology investments are necessary for achieving your IT goals, it’s time to research vendors and solutions that meet those needs.
Compare features and prices between different vendors in order to find the best value for the money you plan on spending.
Step 7: Create a Budget Plan
Once you have researched different vendors and solutions, create a budget plan that outlines how much money will be allocated for each purchase or upgrade.
This plan should include details such as when payments are due and how much each payment will be so that there are no surprises down the road.
Step 8: Monitor Spending
It’s important to monitor spending throughout the process in order to ensure that all expenses stay within the predetermined budget limit.
Track all invoices and payments closely so that any discrepancies can be addressed quickly before they become major problems later on down the road.
Step 9: Communicate With Other Teams
Talking to the IT team and other departments can help you gain a better insight into where, how, when, and why technology around the business is used, which can help you prioritise, streamline, and reduce potential waste of technology around the company.
You could be currently paying for several licences that are not being used by a particular team. This means you can either reallocate or stop paying for wasted licences.
This is also a great time to find out from managers and employees what they'd wish to see in the budget, including new technology or upgraded equipment.
Take notes of any trends as this could be an insight into commonly occurring issues or suggestions.
Step 10: Adjust Your Budget as Needed
Last but not least, the final step in creating an IT budget is to remain flexible and adapt as necessary.
Unforeseen expenses can arise, and adjustments may need to be made due to delays in delivery or shifts in market conditions.
These unexpected circumstances might require additional funding for specific projects or initiatives.
It's crucial to stay agile and responsive in order to ensure the success of your IT budget.
Your budget should include a section for plans/needs.
This should consider upcoming projects, training, potential new hires, office moves, and anything that has been discovered in the previous four steps.
Thoroughly researching future needs will help you anticipate and make educated predictions of expenses over the next 12-months.