Setting an annual IT budget lets you know how much money you plan to spend on things like software, hardware, and IT services. Technology has become so essential to business success that companies in practically all industries need to establish IT budgets.
At least once a year, though, you should audit your IT budget to make sure it matches your current and future needs. By the end of this article, you will know how to perform a basic IT budget and the benefits that you get from doing so.
Ready? Let’s go.
Compare Your IT Budgets
Too many businesses assume that they will spend about the same amount on IT from year to year.
In reality, the amounts vary significantly.
If you buy new computers and a server in 2018, then your 2018 IT budget will probably include more funds than your 2019 budget. And, since you updated your technology in 2018, you probably don’t need to spend as much the following year.
You can start auditing your IT budget by identifying lines that do not repeat often. A subscription will occur each year. Equipment purchases, however, usually only happen every three to five years.
Knowing this can help you purge budget items that don’t apply to the current year.
Set Goals for Your IT Budget
Your IT budget needs to focus on helping you reach specific goals. The goals that you set will vary depending on your industry, size, and other factors.
For instance, a software company may set a goal to increase spending on research and development. By spending more money, the company can improve its services. A construction company, however, may want to decrease its IT spending so it can reallocate money to other needs.
Related: 4 Ways a Virtual CIO Helps Your Business Grow
Don’t set generic goals like “spend less on IT” or “spend more on IT.” Instead, set specific goals like “spend a maximum of $500 per month on IT.”
Setting a precise goal will encourage you to improve your IT budget. If you say “I want to spend less on IT,” then you may end up spending $700 per month instead of the $800 per month that you paid last year.
Setting that specific goal of $500 per month forces you to make hard decisions that will trim away more fat.
Share Your IT Budget With Others
You might be in charge of setting your company’s IT budget, but that doesn’t mean you should make all of the decisions without feedback from others.
Share your IT budget proposal with managers and ask them to give you a review.
Managers may identify areas in their departments that don’t need as much funding this year. Of course, some of them may want to increase funding for their departments. Listen to their arguments carefully to determine whether you agree with their assessments.
You don’t have to follow someone else’s advice, but it’s good to let another person challenge your approach. No matter what you decide, at least you will know that you thought hard about the issue.
The Benefits of Performing an IT Budget Audit
Auditing your IT budget will help you take control of your expenses. Some of the benefits include:
- Knowing how much you will spend on IT (instead of making a guess)
- Learning which IT hardware, software, and services aren’t essential to your business’s success
- Finding ways to redirect money from IT to other parts of your business that need funding.
Auditing your budget will take some time. Most companies find that the benefits outweigh the time, though. After all, no one wants to run a business without direction from an effective budget.
Related: Important Questions to Ask a Potential MSP Partner
Get IT Budgeting Help from PCS International
Look, we get it.
IT budgeting isn’t exactly straightforward. There’s a lot of variance here and there, and it’s something that you should get right the first time around.
Talk to us to get a professional consultation on where your IT finances are, and where they should be going to meet your business goals.