IT Budgeting Made Simple: Part 1
Hello and welcome to Tech Riffs. My name is Killian and today we are excited to start a special two part series tackling the ever so scary word, “Budget”. By the end of these videos we hope that word will have a more liberating connotation for you. For most of us, budgeting our IT is NOT what we look forward to every year
Yeah I’ve never seen that happen. But, failure to budget, moreover with future growth in mind, can lead to some stressful times. So we are sharing six extremely helpful steps from our strategy for creating a Proactive IT Budget.
To figure out where we are going, we need to look at where we have been. Today’s three steps are about gathering data to inform your budget decisions. Are you ready? It’s time for step one. It’s time to do some research!
Step #1: Research
We will start by reviewing the previous year and track what was spent, categorizing the findings into hardware, software and licenses. Also, make sure to review credit card statements in addition to written paper checks. Then subcategorize those into one-time and recurring expenses i.e. monthly or annual subscriptions. We need to understand the breadth of items assigned to the IT Budget. If there was a budget last year, it’s time to compare, how did the IT department do? Did we come in under or over budget? These items give us a baseline understanding of what to expect for creating this year’s budget.
Next we need to understand our current assets. Take inventory of all IT equipment. (And I mean ALL of it!) We want to gather data such as, when each item was purchased, the warranty status, is software up to date, and of course licensing: will marketing need that Adobe CC subscription again this year? How many Office 365 users are you paying for?
Next, it’s time to meet with the management. Ask about their projects and goals for the next few quarters, or even the next few years. Ask about things like hiring needs and software updates. Use this time to get a pulse on how the current technology is working for employees.
Lastly we need to clarify what should be in the IT Budget versus being allocated to another team or department’s budget.
Now we take all this information ZIP it up (tech pun) and move on to step two!
Step #2: Proactive Asset Management
It is incredibly important to know the life-cycle of your equipment. So, using the inventory list created in step one we will create an Asset Life Cycle document. (This is where the purchase date and warranty information we collected come in.)
Now, there are special circumstances, but for the majority of our clients, we recommend replacing PCs every 3-5 years. A good rule of thumb is 20% per year. For networking equipment, 5-7 years is typical for a refresh. (If that number seems daunting, remember you can save money by buying PCs in bulk.)
With this information, we can see where each piece of tech is in its life-cycle and budget for its replacement. Once this document is started, it’s just a matter of keeping it up to date.
Step #3 Understand Your Recurring Revenue
As you may well know, almost all software seems to be on a subscription based model these days, requiring a monthly or annual cost. Hardware also comes with licensing costs which are typically annual spends. Side note here: When it comes to these “subscription-based models” we definitely recommend buying longer licensing periods up front to take advantage of additional discounts.
So step three is to look at all these costs and break them down into monthly, yearly, and multi-year expenses so we can properly allocate when the dollars will be spent. We need to dig deep to find all of the sneaky subscriptions that might be lurking beneath the surface, and again make sure to check credit card statements. These charges can add up and are easy to forget!
Ok, I think we have enough homework for now with the first three steps. So with that I am going to go ahead and end part one of our special budget Tech Riff. Take some time over the next week or so to start gathering data and feedback, tracking inventory and looking into your recurring costs! Also, make sure to subscribe and hit that bell icon to get notified when part two is available. Until then, have fun researching. I’m Killian Smith, take it easy.