5 Essential steps for setting your IT budget: 2017 edition

The new fiscal year is right around the corner, so it’s important that businesses start planning now –  especially when budgeting for key initiatives. One of the most important planning areas is your IT budget, as your IT capabilities will be an essential component of achieving your strategic goals for 2017.

Not sure where to start? We’ve identified five important steps for creating your 2017 budget:

Step 1: Audit and review your IT assets and processes

For simplicity, let’s define your IT assets as any technology systems used by your business, which include the following:

• Hardware
  • Desktops
  • Laptops
  • Mobile devices
  • Telephones
  • Servers
  • Firewalls
  • Routers and switches
  • Printers
  • Security cameras and systems
• Software
  • Installed desktop software
    • Microsoft Office suite, Adobe Acrobat, etc.
  • Installed line of business and other client/server software
    • QuickBooks, Sage, practice/case management, CRM, etc.
  • SaaS (software-as-a-service)
    • Software accessed by logging into a web browser portal
    • Online versions of QuickBooks, Sage, CRM (e.g. Salesforce), filesharing tools (e.g. Dropbox), etc.
  • Custom software
    • Software applications custom-written for your business

Your IT partner should be able to provide you with a comprehensive report listing your hardware devices, as well as the software installed on your computers and servers. That report should also include the age of your servers, computers, network equipment and other devices. One primary question to answer when reviewing your IT assets for budget purposes is, “Will I likely have to incur costs on this item in the coming year?” For hardware items, consider whether the item is reaching end of life, and for software, determine when you have to renew licensing.

If you don’t have an IT partner to give you an IT inventory report, free tools are available, such as IT Asset Management Software from our friends at Austin-based Spiceworks. Keep in mind that you’ll need someone on your staff who’s qualified to install and run the software, then analyze the results.  The inventory report will also include information about the software and updates associated with your hardware. Other devices will need to be inventoried manually, such as freestanding copiers, workstations that are not on the network and conference room projectors and monitors.

Next, it’s time to define your IT processes. For this step, make list of the processes and workflows you use to run your business.  These will likely employ manual functions and IT systems together.

Common processes pertain to:

• Sales
• New client onboarding
• Customer care
• Work orders
• Project/case management
• Documentation
• New hires
• Issue resolution
• Disaster recovery

Note that at this point, you are merely inventorying your IT assets and processes.  In Step 4, you will assess their effectiveness to determine whether any additions or changes are necessary.

Step 2: Audit and review your IT spending over the last 12 months

The best IT partners will meet with you regularly to review the current state of your technology and to help you budget for future IT costs. They should be willing and able to put together a rolling 12-month review of your IT spend that includes all the equipment and services they provided.

In semi-annual business review meetings, MyITpros reviews a report like this with clients (click for larger view):

Clients are able to take this spreadsheet and add any other expenses incurred, such as software licensing, hardware purchases/leases, internet, hosting or telephony not provided through their IT partner in order to gain a complete picture of their IT spend in the previous 12 months. You can obtain these items from your P&L statement.

If you don’t have a report like this available, you’ll need to create your own. If you have an accountant on staff, enlist him or her to complete this task.

Step 3: Create a baseline budget

Now that you have the last 12 months of your IT spending saved in a rearview spreadsheet, copy and save the information into a new forward-looking forecast. Change the dates, leave the amounts you don’t think will change, and make adjustments to reflect alterations you are certain about.

Congratulations! You now have a better IT budget than 99% of small business owners. (When asked about their IT budgets, they will typically answer, “My what?”) That said, taking the following steps could help you save some serious money, improve your company’s productivity and morale, and more.

Step 4: Assess your IT management

This step is about putting together “must-change” and “would-like-to-change” lists by looking at and validating all of your IT providers, software, services and systems. Start by asking the following questions.

1. Are you happy with your:

• IT partner(s) or employee(s)?
• Internet connectivity?
• Phone systems/service?
• Business software?

2. Do you need:

• More or less of anything (e.g. bandwidth, data storage)?
• Software that would improve productivity and/or effectiveness (e.g. CRM, practice management, filesharing)?
• Better or more proactive support?
• Better security?
• Regulatory compliance?
• Better disaster recovery?
• More visibility into your IT?
• More uptime and better systems performance?

3. Is there something you no longer need at all?

• Do you still require your on-premise server?
• Are there certain items that can be moved the cloud?
• Are you paying for used/unneeded licensing?

4. Are you paying the right price for all of the above?

• Have you done any comparative pricing?
• Has your IT partner done any comparative pricing for you?

What else do you wish was better in some way? Is there anything you wish you had that you don’t?

These days, the three items that tend to be at the top of most small and medium sized businesses’ must-change lists are:

1. Better security, because of the proliferation of ransomware
2. Better disaster recovery, because many businesses (especially SMBs) cannot recover if they lose their data
3. Better or more proactive support, because IT is so critical in day-to-day operations

The key is determining what is most important to you and your organization.

Step 5: Get quotes and finalize your 2017 IT budget

With your must-change and would-like-to-change lists in hand, you’re ready to get price quotes and make some final decisions about what to change in your budgeting spreadsheet.

When determining what stays, what goes and what changes based on the estimates you’ve put in place, it’s important to be conservative in your estimates. In other words, try to overestimate your costs! After all, it’s easy to find ways to spend your unused cash, but it can be really painful to come up with money when costs exceed your budget.

Collaborating with a trustworthy and experienced IT partner will greatly simplify your IT budgeting process in terms of aligning your IT systems with your strategic business objectives. You and your staff will still need to invest some time and effort into identifying and prioritizing issues, but an IT partner will be a big help.

Byron Attridge, Sales Consultant

The purpose of this blog is to answer the questions you ask! I am always happy to talk about planning for IT and managed services, so please feel free to contact me! You can also check out our resources section for more material on planning IT for your business- and stay tuned for our free Budgeting for IT ebook later this month!