So, you’ve recently gotten promoted from a sysadmin to an IT manager. Congratulations! As they say, with great power comes great responsibility — and also having to deal with budgets. If you’re new to the business side of IT, you may not be familiar with the way budgets work in your business. The good news is that you probably won’t be the one in charge of making the budget, but you will have to understand how your department fits into the grand scheme of finance in your company.
How Corporations Deal with Budgets
It’s likely you won’t be sitting down and creating a budget line-by-line, but it’s still a good idea to understand how your IT department and Finance departments work together.
In almost every corporation, and some medium-sized businesses, budgets take a top-down approach. They’re decided by high-level executives and then pushed down to departments. Every department, including IT, will get a set budget that aligns with the strategic initiatives the company has made for the next year. These goals are undertaken by corporate leadership to help grow the business (also know that up at the top, these strategic initiatives are commonly tied to the bonuses of these executives, so they have a great interest in making sure you achieve them).
For IT, this budget will likely be a mix of operational expenses (keeping the lights on), capital expenses (hardware and software licenses) and project funding (projects will typically help achieve those strategic initiatives).
How to Maintain Your IT Funding
To create your budget for the upcoming year, analysts in your finance department will assess your budget and spending from the previous year. They’ll look at how closely spending has stayed within what was projected for the year — they want to see as little variance as possible.
To them, a variance in a budget is bad, even if you come in under budget (this is especially true in larger corporations). If you are consistently coming in under budget every year, it means that you aren’t planning your year properly and, even worse, that you don’t have a good grasp on how your department operates. Additionally, if you have a surplus for several years, then it’s probable that the funds will be taken away from you and redistributed to another department.
So, how do you make sure that you keep to the budget you have while also helping to achieve strategic initiatives? I asked a former Financial Analyst for Abbott Laboratories and Stanley Black & Decker his advice on keeping a balanced budget and promoting harmony between IT and finance departments. Here are his tips:
1. Know your business.
Once you take control of your IT department, you need to know everything about it. You need to know specifics of each piece of hardware, not just the cost of the item, but how much installation, setup and maintenance cost. Be cognizant of warranties, subscriptions and software licenses and when those expire. Keep track of which machines are nearing their end of life and what the replacement options are. Retain contracts and track spending on everything. Knowing the ins and outs of your department will help you better predict future spending.
2. Keep up on technology trends.
Technology changes faster than budgets can keep up with and it’s not finance’s job to keep track of that, it’s yours. Stay up-to-date by reading the latest tech and business blogs and news. See which way certain technologies are trending and note how those may align with your company’s strategic initiatives. You’ll get points with the finance department and your bosses for being informed on these trends ahead of time.
3. Talk to finance.
Keep in mind that finance has given you this budget as a sort of blueprint for the coming year. They stick to these projections because it’s the best way to succeed. We know that finance wants to minimize variances to the budget, but at the same time, we know that tech changes rapidly, so new expenses are bound to happen. This is where your relationship with finance becomes key because you serve as the bridge between IT and finance. Being able to communicate the value of any expenses and relate them back to strategic initiatives will be critical to gaining finance’s approval for the spend.
4. Spend what you’re given.
If you want to keep all your funding, you need to spend it. If you’ve been tracking everything, this shouldn’t be a surprise. By spending all of your allotted budget, you’ll make sure to keep it when it comes time for next year’s budget creation.
If you take away anything from this piece, let it be these two things: know your department backwards and forwards and be communicative and transparent with the finance department. By working together and understanding the process, you can make sure your budget stays on track, while also helping your company achieve the bigger picture goal of strategic growth.
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