When preparing a department budget, every IT manager must ensure that it is an accurate reflection of business goals, technology needs and economic realities. When presenting the budget for consideration, sponsorship and approval, IT managers must also be prepared to explain and justify that budget to ensure that all expense issues are clearly defined, and realistic service expectations are set. Read on for more.
It All Begins with a Budget Goal
Before you prepare your departmental budget, you must have a thorough and accurate understanding of all budget related goals. In all likelihood, these goals will have been set for you by company management, and will depend in large part upon current business circumstances, economic conditions, and the role that IT plays within the overall organization. As such, you must be fully aware of your budgetary marching orders, which will likely encompass three realities:
- Reality #1: You will be expected to maintain your prior budget ... no more, no less.
- Reality #2: You will have to cut your prior budget .... "time to do more with less".
- Reality #3: You will be allowed to increase your prior budget in order to keep up with specific business or technology needs.
How to Set Working Budget Priorities
Step 1: Set Budget Goals and Strategies
Once you are aware of your budgeting "realities", you can begin the process of identifying related priorities, which will shape and refine actual budget results.
- Will it be possible to maintain the budget and still provide the necessary services and projects?
- If not, what items in the budget can be reduced to compensate?
- If budget cuts are in order, how will essential services and projects still be provided?
- How will difficult budget decisions be made and communicated?
- How will you deal with staff disappointments and end-user complaints?
Step 2: Identify Budget Components
- How will IT funding be spent considering staffing, capital investments, supplies, overhead, facilities, travel and related expenditures?
Step 3: Identify Service Priorities
- What are the identified priorities for the IT service portfolio and what are the related operational costs to deliver these services?
Step 4: Identify Business Priorities:
In order to prepare a realistic IT budget, you must have a solid grasp on business priorities.Based on business type, current conditions and circumstances, likely business priorities will likely include any or all of the following:
- To cut IT (acquisition and/or operational) costs and related expenditures.
- To improve workplace and IT management productivity.
- To deliver new or improved technologies.
- To eliminate technology (system and/or operational) problems.
- To improve IT service delivery and related customer service satisfaction.
- To improve performance of in-place technology systems and solutions.
Step 5: Align IT Priorities with Business Priorities:
The final step in this budget planning process is to align IT priorities with business priorities, aligning technology spending, IT services and related projects with established business goals (all as part of the IT management vision). As you begin this alignment process, you first need to look at your budget as a whole in terms of overall goals and management directives.
This is the time to expand the planning scope and make tough decisions.
- Do you need to maintain, cut or increase the current budget from prior budget levels?
- If you need to maintain the budget levels from your prior budget, will you need to eliminate or defer any projects or planned initiatives that would require additional spending?
- If you need to cut (reduce) budget levels from your prior budget, how will those cuts be made? Across the board (equally to all budget items)? Apportioned to specific budget items, leaving others intact? Apportioned to specific budget items, allowing for necessary increases in some areas, with corresponding cuts in others?
- If you need to request budget increases, can those increases be justified on the basis of IT and business priorities?
Some closing thoughts....
Business priorities may not always be clear, and if you are not sure, ask. You can interview managers, conduct surveys, or take advantage of staff observations made in the course of projects and support activities. It will be difficult, if not impossible, to make difficult budget choices, if you do not have a good understanding of the business needs and priorities.
Continue with more on this subject in our next article Estimating and Tracking Project Budgets.
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