Pro-Tips on Creating the Right IT Budget 

Budgeting that awful “B” word that no one enjoys. Large enterprise companies have the time and resources to put together very detailed budgets for their organization. Smaller and medium-sized companies have more significant resource challenges. 

Creating a detailed IT budget cannot be done in a vacuum. It takes much input from all the department heads, the CEO, CFO, department heads, and of course, the IT team. The more information you can gather beforehand, the more detailed you can make your budget. If this is the first time you create a budget, get a report from accounting on all the IT expenses for the last two years. Knowing the past costs will help you understand your recurring and capital expenditures.  

Like all aspects of your business, your technology infrastructure needs a budget that describes real spending money to reach your goals. More prominent companies do this every year, but smaller companies tend to spend as they need without thinking about their investment returns. You need a clear budget every year!

Depending on the lifecycle of your infrastructure, some years, you may not make changes to your budget. In other years, you may need to drastically increase or decrease the amount of money you spend on IT.

Follow these steps to create the perfect IT budget for your small and medium-sized business’s short-term and long-term goals.

First, you need to review last year’s IT budget! 

If you didn’t have a budget last year, have accounting run a report of all the IT expenses you had for the previous two years. If you had an IT budget the previous year, review it to determine where you need to make changes. If you spent money on large purchases like new equipment (desktops, laptops, servers) last year, you probably wouldn’t need to repurchase those items for the next few years. Also, use last year’s budget to find periodic expenses.

Things to consider in reviewing last year’s budget

Understand where your money went!

Where was the money spent, was there an overage on any line item, was there a shortage? Were some lines items overestimated and some underestimated? You will need to adjust these line items. In some companies, if you consistently overestimate what you need, you run the chance of not getting approval for essential things. 

Pinpoint areas for improvement

Identify areas where you can save money to increase your company’s return on investment. Do you need servers on-site where a cloud server may save you money? Do you need new desktops or laptops when you can use virtual desktops? 

Know the cost of recurring expenses!

Some IT costs don’t change much from year to year. Some everyday IT expenses include:

  • Cloud storage space
  • Renewing software licenses 
  • Domain registrations
  • Content management systems

Your regular costs may be different from other companies. Look closely at your business expenses to identify items you haven’t included in past budgets.

Take Inventory of your IT Hardware and Software!

Take inventory of your IT equipment and the age of the devices. Once you have a completed list, you can decide when to do a technology refresh to update or replace your equipment.

You have some discretion regarding how often you refresh your IT equipment. Most companies will replace desktops and laptops every 3 to 5 years. A computer that is five years old may seem to work well, but it probably can’t keep up with the speed and workload of newer models. Keeping old equipment could lower the productivity of your employees.

Other pieces of technology that you need to update include:

  • Servers (about every three years)
  • Wi-Fi routers (every 4 or 5 years)
  • Mobile devices (every 2 or 3 years)

If it’s time to upgrade your IT equipment, you need to create a line for that expense. If you don’t need any upgrades, you can reserve your money when the time comes.

Make sure when creating an inventory!

When doing inventory, make sure you note all of the following:

  1. Hardware must include the date of purchase, location, purpose, expected end-of-life date.
  2. Software must contain the number of licenses for each application, the application version, the purpose, which department uses the application, who needs access to the application, the expiration of licenses.

Depending on the size of your company, you might opt to buy inventory management software. 

Talk to your Employees and Managers!

Employees and managers will better understand what upgrades are needed than you do. After all, they’re the people who need to use equipment and applications every day. 

Many managers and employees will know about an emerging technology or new software that will improve their job production. So, talk to your managers and teams to learn more about what they would like to see in next year’s IT budget. If you hear identical requests from many people, consider adding a line to your budget. Don’t feel obligated to fulfill the fancies of a few people. Only add the expenses to give you a good return on your investment.

Plan for the Future!

Having a good understanding of your IT infrastructure’s current state and future state will help you decide on the budget for the next 3 to 5 years. 

Budgets should include a line for research and development to improve your company’s ability to compete with your competitors. Depending on your industry, this will include things like:

  • Sending the IT Teams to IT conferences to learn about emerging technology
  • Hiring developers to update proprietary software
  • Hardening your IT infrastructure security from the latest cyber threats

Researching and planning for your future needs will make it easier for you to predict your IT expenses over the next 3 to 5 years.

IT Budgeting

The perfect IT budget ensures that you spend money wisely while updating your small and medium-sized business technology. You can take a stab at making an IT budget without outside help, but you run the risk of missing an essential line item.

If you haven’t made an IT budget before, you may need a Fractional CIO to help you find hidden costs and make accurate predictions. We are ready to help you create a solid IT budget that accurately accounts for your expenses.

There is no 100% solution and no perfect plan. Having someone accountable like a CIO or Fractional CIO can ensure you are doing the best you can accomplish. 

At JAYCO CIO Services, we don’t do anything other than CIO services. Right now, we are offering 50% off our CIO Assessment. The assessment is an excellent way to get to know us. We will work with your executive officers, stakeholders, and IT team to show you where you are deficient and supply you with a report to increase your understanding of where you need help.  

Similar Posts