Now that we have reached the final quarter of the year, it’s likely you are looking toward the next year and beginning the budget planning process. Not only does a budget help you to look ahead to anticipated income and profit, it allows you to be intentional with your spending over the coming year.
If your organization uses technology (and most do), including IT in your budget planning will help you to control costs while also keeping your tech up to date.
Understanding Your Budget’s Purpose
Many businesses treat the budget planning process as an end-of-the-year formality. However, a budget is a map for the coming year, and the more detailed you can be in creating it, the more successful your year can be.
When you establish a budget, you predict income, profits, and ROI for a full year. Balanced against those figures are the expenses you expect to incur – operating costs, equipment purchases, payroll, employee benefits, and so on.
Budgeting can be a significant part of the success or failure of a business, so it is in your company’s best interest to develop and follow one. As you do, keep your immediate business goals as well as your long-range ones in mind, such as:
- Equipment investments
- Technology upgrades
- Office relocation or remodel
- New staff hires
- Employee training
- Profit-sharing or bonuses
Elements of a Small Business Budget
Small businesses, especially, need to establish an accurate budget. Businesses live and die based on the management of their cash flow, and budgeting can help to define the path toward success. But a budget isn’t just about predicting income and expenses over a twelve-month period. A thorough small business budget includes:
- Strategic plan
- Business goals
- Projected revenue
- Projected costs – fixed and variable
- Goal expenses
- Targeted profit margin
Many small businesses make the effort of creating a formal budget but ultimately don’t follow it. However, establishing a plan for a year’s income and expenses can be beneficial if you commit to revisiting it throughout the year. Periodically examine the performance of your business and compare it to the figures outlined in your budget. Chances are, you will need to adjust your figures as the year progresses. It’s rare that a budget year goes exactly to plan, and viewing this as a process rather than a single event can be helpful when it comes to making adjustments.
What to Consider When Planning for IT Expenses
One area of budgeting that many businesses under-plan for is IT.
IT costs can be a significant part of a company’s budget, both in the short term and as a long-range expense. Knowing where you stand with your technology will help you to plan for both scenarios.
- Consider your common IT expenses – operating systems, software, hardware, licenses
- Consider your specific IT expenses – server replacement, workstation/laptop upgrades
- Use historical data to project expenses
- Predict one-time spends
- Look for ways to make spending linear – using managed services can provide your company with a fixed monthly expense instead of a sporadic fluctuation of costs.
- Look for ways to push costs down – examine server capacity, phone system usage
How Does Your Budget Play into Your IT Strategy?
IT spending often looks like a stair-step graph. You can operate at one level for a certain period of time, but business growth often means adding new employees. These new staff members can cause your IT expense to increase dramatically due to the additional equipment and infrastructure required.
Ongoing expenses such as software upgrades, license renewals, and cost of phone lines have a place in your budget. Of course, any new technology or upgrades will require staff training, so don’t skimp on providing that training. It’s also a good idea to consider preventative training on topics such as viruses, malware, phishing, and ransomware – a single incident can cost your company thousands of dollars for recovery.
Being thorough with your IT budget can help you to maintain and improve your tech costs.
How Do You Decide What You Need to Do for IT?
Examining your current year and making plans for the next year requires you to be realistic about current and future plans. What are some areas you need to consider for your business’ IT?
Be aware that there are general lifespan guidelines for most technology. Examine the age of your laptops, workstations, and servers and determine where they fall on the lifespan. This will help you to plan for upgrades and replacements in a timely manner. Staff productivity will be a factor. Maintaining or upgrading equipment should be examined through this lens. A PC that was fast three years ago but now handles three times the work might move much more slowly, affecting productivity.
Looking for areas to reduce costs is an important part of the budget process, as well. Examine your employee workload and consider ways to make your staff more efficient. Do you have the right people performing the right tasks? Would it make sense to outsource some of your IT responsibilities? Conversely, are you using outside vendors to perform tasks that you could more effectively handle in-house? Would it reduce your overhead to have some staff members telecommute? Because your employees are both an expense and a valuable resource, using their time and talents efficiently should be a key consideration.
Licensing and Service Agreements
Consider the technologies currently in use by your staff. Are they effective, or would your business benefit from something different? Would cloud-based services take some of the burden off your infrastructure? Often, software or licensing agreements can be tailored to your needs, so examine how your staff is using certain applications. If only a few employees need access to a specific program, per-device licensing will limit the number of access points to that program, which can be more efficient. Conversely, per-user licensing allows an employee access to a certain program from multiple locations, which allows for greater productivity for all of your staff. Determine which programs will require full access and which ones only need limited users, and negotiate agreements accordingly.
Processes and Systems
Another area to consider is the processes and systems your staff will use. If a single department performs a specific set of tasks, standardizing their methods and operations is a more efficient use of their time and your budget. This is particularly helpful if you provide your customers with some sort of service offering. Standard practices and procedures will allow any one of your service staff to assist a customer, instead of your customer waiting for the one person on your staff who uses a specific system. In-house, a standard set of processes and systems means you can troubleshoot problems quickly and easily. Consider, also, any legacy systems you may have in place. Make plans to upgrade or replace these systems before it becomes a critical need. By eliminating unnecessary processes and systems and establishing standards, you can bring costs under control.
Putting It All Together
As technology becomes an ever-larger player in business, accurate forecasting for IT will be an important part of your budgeting process. Examining the various parts of your business and assessing your needs will enable you to establish a budget that will allow for business growth. Still unsure about budgeting for your IT needs? Lieberman Technologies can help you to assess your technology needs and help to determine what your IT budget should include. Contact us!