You may probably be wondering how much your company has spent on IT as the year draws to a close. This year has been unpredictable and challenging for many businesses worldwide due to the pandemic; having to adjust to remote working models will undoubtedly influence their overall budget, considering the unexpected investment in technology and IT systems.
A recent study has suggested that 44% of businesses are expected to increase their 2020/2021 IT budgets as they adopt new technologies to support revenue and development opportunities. The budget for the upcoming year highlights some key areas, including:
- Enhanced artificial intelligence
- Adoption of edge and server-less computing
- Hyper-converged infrastructure
- Improvement in security and management of cloud infrastructure
Before you start preparing your company’s IT budget, it is crucial to understand what it means and how it can serve as a planning and communication tool. What is an IT budget?
An IT budget is a financial plan drawn up by a company’s Chief Information Officer and is used to outline the costs incurred by the IT department over some time. It includes compensation for professionals and expenditures associated with building and maintaining enterprise-wide systems and services.
With the right knowledge and information, creating a budget for your IT department is no tedious task. Your budget is a tool to identify and implement necessary IT initiatives for your business, such as investing in advanced IT solutions.
Steps to Identifying Your IT Expenses
Review Last Year’s Budget
Ideally, drafting your budget must begin immediately after last year’s budget is granted. This means you can leverage the previous year as a starting point. This way, you can easily monitor your spending and determine how to allocate funds effectively and can also identify expenses that can be reduced or reallocated.
Know Your Recurring Expenses
These are known as fixed expenses and are incurred regularly. For example, if you pay a flat monthly rate for managed services, you know exactly how much you need to budget for your IT. Like personal overheads, cutting back on regular expenses means you’ll have more money available. During the budgeting process, find means to reduce these costs.
Analyzing your inventories is vital to the budgeting process as it enables you to understand how much stock the business holds and must buy to drive its objectives. This process also helps in cost control and evaluation.
Ask Your Team for Feedback
Although it is necessary to take responsibility for your budget, receiving help from the team is beneficial. Your department is one of several parts of a larger entity, so being proactive and ready to engage your team during the budgeting process is strategic.
Differentiate Between Needs and Wants
This is crucial in objectively assessing your business spending. “Needs” are the essential items the business cannot do without, while “wants” are usually viewed as enhancements.
Take A Long View
Align your IT goals with your entire business’s goals. Although each expense is justifiable, it is crucial to define the long-term objectives. Doing this would help identify necessary expenses for your long-term purposes and adequately allocate money to short-term goals.
A well-developed budget can help a business track its performance while communicating its overall goals and objectives.