Posted by Amanda at Varay on Sep 8, 2020 12:04:04 PM

October is just around the corner, and with the crunch of autumn leaves and the sweet fragrance of pumpkin spice lattes, it’s about time for the start of a new fiscal year. 

As you take this month to prepare and finalize your budget, we're here to empower you to balance your IT budget so that you don’t underestimate your company’s 2020/2021 IT expenses. 

Companies that accurately assess the funds required to meet their IT needs and allocate their budget accordingly are successful. There’s nothing more discouraging and dangerous than being forced to go over budget when repairing or replacing critical IT components after a technological disaster. 

That’s why it’s so crucial that your company’s budget has practical, sustainable, and realistic IT allocations. To estimate your IT needs and build them into your budget, you must examine what your budget is currently and where it needs to be. 

Assess where your current IT budget stands

Close up of a business person examining budgets with financial documents in their left hand and a magnifying glass in their right.

To see where your IT budget needs to improve, let’s start with what your IT budget currently looks like today. Then we’ll give you critical questions to review with your team to see if your IT budget meets your company’s needs.  

Three-year comparison

First, we recommend looking at each of your IT budgets over the last three years, converting them to a percentage of your total annual revenue. Then, compare these three IT budgets in chronological order to analyze for trends. 

While you look at your IT budgets from the past three years, ask yourself (and others) these critical questions to see if your IT budget allotments have really been meeting your needs. 

IT budget assessment questions: 

  • Over the last three years, has your IT budget grown, shrunk, or stayed the same?
  • Have you gone over your IT budget during these last three years? If so, how often and for what purpose? 
  • Have you encountered any cybersecurity issues in the past year?
  • Are there any purchases, salaries, or expenses supported by another part of the budget that should actually be included in your IT budget?
  • Is your team satisfied with the IT support they’re experiencing? 
  • Are there any IT processes that are impeding company efficiency?
  • Do you have any significant expansions planned that would require IT upgrades within the next year?
  • Are you migrating from on-premise to cloud solutions
  • Has the COVID-19 landscape altered your remote capabilities and given rise to security concerns? 
  • Is your company preparing for the End-of-Life of your equipment
    • For example, many companies still need to upgrade from Windows 7 to Windows 10 because Microsoft no longer supports Windows 7.

These questions are just a starting point to help you begin thinking about whether or not your IT budget is adequately funding your current and future company needs. 

Bring in the team

We highly recommend bringing in other team members to help answer these questions, as well as reaching out to your staff at all levels to ascertain their daily frustrations or issues with your IT processes. 

If there are little to no issues, that’s great! That means your IT budget may just need tweaks or minor adjustments. However, if there are significant IT problems that aren’t being addressed, you have the opportunity to discover them now and plan for improvements before an expensive outage costs your company. 

Determine where your budget needs to be 

 Drawing of a businessman on a mountain with a briefcase in-hand, looking through a telescope with the other.

Now that you know where your budget currently stands and whether or not your IT needs are actually being met, it’s time to create the IT budget that your company deserves. Whether your current budget requires minor adjustments or major enhancements, forecasting your new budget to meet your company needs is an essential, growth-minded investment. 

IT budget formula

IT budget = Total annual IT expenditures (hardware, software, and services, IT staff labor, and depreciation). This should typically fall between 2-4% of your annual revenue.

This formula is a simple but powerful way to calculate your IT budget. It incorporates all your needs and expenses, preparing your budget to take care of your company throughout the new fiscal year. 

Adjust for the assessment questions

When using this formula to estimate your IT budget, it’s important to take into account the information you discover from answering the assessment questions we provided above. (I.e., don’t just calculate 2-4% of your estimated annual revenue and call it quits!) 

Here are a few examples: If you’re planning to expand to a new location within the next year, or add several new team members to your growing remote team, adjust your projected IT expenditures accordingly. 

Or, if your company has experienced cybersecurity issues, pad the services section of your IT expenditures with IT enhancements that will protect your company and customers from potential breaches. 

Embrace the adjustments

It’s tempting to keep an IT budget the same from year to year, especially when you manage a large organization with multiple departments to oversee. We know that you may be tempted to leave your IT budget alone if you haven’t encountered significant problems, but the process of assessing and adjusting your IT budget does more than just prepare your finances. It gives you the opportunity to streamline your operational processes, improve team morale, and protect your company and customers, all through improved IT services. 

We understand that the task of accurately estimating the IT budget for your company’s growing needs isn’t easy, but we’re sincerely hoping this article will help you in the process. If you have more questions, concerns, or information regarding your company budget’s needs, we would love to hear from you! Contact Varay today for the help you need, and see how Varay can help your company exceed IT expectations. 

Topics: business, IT budget, business insights, finance