Determining an IT Budget for Your Business

How to Do It and Why It Is So Important

When it comes to IT support, most business owners and managers aren’t exactly sure how much money should be budgeted. The unfortunate truth is that IT challenges are hard to predict. As a result, most executives find it somewhat difficult to predict the amount of money that will be necessary and when it will be required. Let’s take a look at this complex issue to help you figure out the proper amount of your company’s budget to devote to IT.

A Brief Explanation of IT Budgets

A company’s IT budget represents the funds reserved for an organization’s information technology systems and services. This figure includes salaries / wages for IT personnel, compensation for outside IT professionals, costs for back-office systems and the creation / maintenance of company-wide services. Add in the costs of IT hardware expenditures, and the amount of money spent on IT can pile up rather quickly. After all, most companies need numerous laptops, desktops, smartphones, other mobile devices, routers, servers, networking equipment and a data center.

Why an IT Budget Is So Important

IT budgeting is growing in importance as our reliance on digital devices increases. Information stored on paper is going the way of the dodo bird. Nowadays, information storage and retrieval are rapidly shifting toward the Internet and computing devices. It is clear that IT will only continue to become more ubiquitous as time progresses. Organizations that fail to institute a realistic IT budget will find that they are not properly prepared for the challenges that lie ahead. A faulty budget or the complete lack of a budget can damage a company’s finances and even threaten its viability as a business.

How to Create an IT Budget

IT budgets are typically presented and managed by IT power players within a company, yet a small group of IT specialists should not be solely responsible for the creation of this budget. Allow everyone, from the head of your IT department to line managers and consultants, to provide input in order to construct an accurate budget. After all, IT employees and consultants will have to operate within the constraints of this budget throughout the next year. Therefore, they should not be excluded from building this critically important spending plan.

Do not delay the formulation of the budget until a month or two before it is due. Begin work several months in advance so you have ample time to analyze the previous year’s IT budget and this year’s costs. You will need plenty of time to study these figures and pinpoint spending areas that can be either reduced or reallocated.

As you ponder what sort of IT budget is appropriate for your business, consider what its purpose really is. A well-conceived IT budget is an honest numeric manifestation of your organization’s IT strategy. The budget should be easily understood so that it can be communicated between co-workers. If executed properly, the IT budget should not be “kicked back” for major revisions. A comprehensive assessment of last year’s IT costs along with anticipated costs for the upcoming year should set the table for the creation of a detailed IT budget that predicts future costs with accuracy. Do not use this document as a “wish list” for the funding of IT projects. The budget should reflect existing savings strategies and generally tell a story that serves as a guide to your organization’s overarching IT strategy. Ideally, it will be divided between major spending categories and appropriate subcategories. It is also prudent to allocate components of your IT budget to areas of the business that the IT department supports. Do not lose sight of the fact that it might be possible to charge expenses right back to those specific departments.

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