Even the most powerful technology platform that money can buy is ultimately still just that — a platform. It’s a tool and how you use that tool is all that matters. When leveraged correctly, IT budgets are more than just a roadmap for investment in technology — they’re an investment in the future of your organisation that guarantees these assets are properly aligned with your long-term goals.
This is why IT budgets are both so important and, unfortunately, so hard to get right.
According to a recent Tech Pro Research survey, for example, 39% of respondents said that their 2018 budget would increase slightly. They noted security, hardware, and cloud computing as primary areas of focus. Yet at the same time, only 48% of respondents said they felt that Executive management actually valued IT funding as much as other departmental budgets. In 2017, that number turned to 65%.
From a certain perspective, that decline actually points to the fact that business leaders are actually having a hard time visualising the positive impact of IT investments — something that can be addressed by making sure that your annual IT budget is set in the right way in the first place.
The Importance of Proper IT Budgeting
In a broad sense, you don’t have to look very far to see why proper IT budgeting is of paramount importance. IT budgets do more than just allow you to set and achieve profit goals. They also allow you to cut unnecessary spending, track revenue, expenses, and even cash flow. Lack of cash flow is estimated to be the reason why as many as 25% of small businesses in particular close their doors prematurely.
But again, this is about more than just making sure that you have the money you need to buy into the technology that you want. Getting your IT budgets in order also allows you to properly allocate revenue to other areas of your business without worrying about coming up short. It’s about having a plan in place that outlines how you’re going to be able to handle required purchases, like equipment and other related materials.
Proper IT budgeting helps you prioritise which investments help you achieve your overall strategy. Whether you plan to migrate to a new software, use mobile apps, or upskill your team using new tools, IT budgeting helps you prepare for the future and ensures your IT initiatives are aligned with your organisational goals.
Having an optimised IT budget can make it easier to secure financing from current and potential investors or even financial institutions, as it shows that you’re aware of how this particular investment is going to pay dividends down the road. The technology itself also allows you to better prepare for busy seasons and slowdowns — something that can have a dramatic ripple effect across your entire year.
More importantly, outlining your IT budget for a certain period helps you identify key areas that you may be spending too much on and allocate that to more important areas instead. For example, listing all your current IT expenses may help you find out that you are still paying for support on a retired software. Having this outlined in your IT budget gives you a clearer picture of where the bulk of your IT budget needs to be reallocated.
If you’re keen on proposing upgrades to an entirely new IT infrastructure, outlining an IT budget makes it easier to present your justifications. A great example of when this can be done is when you’re planning to upgrade to a cloud-based server which saves on support costs versus physical servers. With an IT budget outlined that highlights bigger savings on cloud servers as compared to the maintenance costs of traditional servers, it is easier to get IT upgrades or migrations approved in your organisation.
It is also a better way to clearly illustrate the positive impact of budget changes as they relate to IT —something that can help improve Tech Pro Research’s statistic about how executive management values IT.
To help you get started with your IT budgeting, we’ve prepared sample budgeting templates that you can use to gain better visibility on your organisation’s IT spend.
1. The Annual Department Budget:
This Sample Annual IT Department Budget template tracks your IT expenditures per month for the entire year. In this sample template, we’ve added Staff training, IT related office supplies and equipment expenses, Telecommunication expenses, Software and contract expenses, as well as IT Personnel expenses. You can customise it according to your organisation’s needs and add the total cost of your expenses for better idea of how much you’re spending on IT for the entire year.
2. The IT Project Budget:
This Sample IT Project Budget template outlines key sections that you need to consider to plan for your next IT project such as research and selection, software and hardware expenses, network expenses, and employee expenses. Note that this template will be a bit different from the others, as not every project will necessarily take a full year to complete. For this, it’s best to break things down based on the number of days you’ll need to work with the listed resources and then get a better idea of overall cost.