Budgeting is extremely important because it helps you track your expenses, control your spending, and ultimately save more money.
A properly prepared IT budget will help drive business results. To ensure this output, an IT budget must be looked at as an investment into the business, not as additional expenses on the income statement or liabilities on the balance sheet.
When done properly, the IT budget will reflect the strategic goals of each department as well as the business as a whole for the coming year(s). It will act as both a communication tool and the framework to move the business forward by creating alignment inside your leadership team, helping foster innovation, eliminating competition, and empowering your people to find meaning in their work.
Before explaining how to build your IT budget, let’s go over some basic budgeting tips:
Before going into budgeting, clearly define who owns the budget. In other words, who's responsible for building the budget and getting final approval from company leadership? Define the budgeting team; who will support the budget owner in building the budget? Who's input is needed? Who approves the final draft of the budget?
Look at your historical cost: what has the company historically spent? Were these expenditures effective? If not, why?
Consider the coming year: do you have any expansions, strategic changes, or organizational plans that need to be accounted for in the budget?
Your budgeting process will likely go through two or more revisions as the departmental budgets come in and are consolidated. This is normal, and the final budget approvers should work with each of the budget owners to communicate/negotiate budget reductions or modifications.
Whoever "owns" the budget should be the one responsible for approving charges against it. In other words, someone doesn't truly own budget performance if others can charge items to their budget without their approval.
Now that we have some general budgeting knowledge, let’s dive into the steps to building your IT budget.
1. Build a Business Strategy. Every business needs to be able to answer the following questions:
Who are we?
Why do we exist?
Who are our customers?
What makes us different?
Where are we going and over what time frame?
How are we going to get there? - This question is the strategy. The reason this question is always last is because you have to know where you are going before you can determine the plan to get there.
Strategic planning inside of your organization is a critical muscle that needs to be built to move your business forward. It will create and communicate the vision to your people, so they know how they can help.
2. Audit and assess the current state of your IT ecosystem through the lens of your new strategy
Now that you know where you are headed, why you are going in that direction and how you are going to get there, it’s time to assess if you have the right infrastructure and vehicles to get you there, and what risks may lie ahead. This is what a Business Practice Review and IT Assessment will help with. You will look at 5 critical areas of your businesses to help determine if the right pieces are in place to ensure you can execute your business strategy.
Information Assets – Is your IP and data secure?
Cybersecurity – How exposed are you for attacks?
Disaster Recovery – How resilient are you to a disaster?
IT Governance – Do you have policies in place to reduce liability and exposure?
Staff Capability – Are your people making the best use of their IT tools?
3. Develop an IT Roadmap based on this assessment that will support the business strategy
With a full inventory gathered and risk assessment completed, you can now review the gaps, risks and opportunities that exist inside the business. Building a solutions roadmap for these is a critical place to start before budgeting. Often these solutions fall into one of three major IT strategy buckets: people, process and technology. By placing the solutions into one of these buckets you can begin to prioritize the initiatives based on the relative effort, the relative cost and the relative impact to deploy them. With this information you can built a roadmap and begin the creation of your IT budget.
4. Create a budget that supports the IT roadmap and turns into the business strategy
With the roadmap in place, you now have all the information you need to build your IT budget. The budget will include the solutions you identified to improve your technology, processes and user experiences. The thorough inspection of your most critical IT and business areas including the access, security and recoverability of your organization’s IP and data have helped identify the gaps and risks you currently have. Put all together, the solutions roadmap informs the budget.
5. Have a continual process inside the business to refresh all four of the above on an annual basis
Budgeting is generally an annual process, but the work needed to get there can happen throughout the year. Said another way, anytime the business strategy changes, you should review the roadmap and IT budget to ensure it can support the new journey. Maintaining business agility will be critical to deal with unexpected scenarios that come your way. If it can't support the new journey, start by reviewing the business’ critical components through the assessment process, build your roadmap and develop your new IT budget.
IT can be costly, but with the proper IT budget, you can save up for what’s important – your data. Contact us today to get your Business Practice Review and IT Assessment.
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