5 Key Considerations for Creating Your 2021 IT Budget
With 2021 around the corner, firms worldwide are in the midst of planning their technology initiatives, and therefore budgets, for 2021. Continue reading for 5 key considerations for planning your 2021 IT budget.
Get technology buy-in
Key budget stakeholders such as the CFO or COO need to be on-board regarding technology investments and decisions. To achieve this, approach your requests as business-driven initiatives and to create real partnerships with the business owners who will benefit from them. IT projects shouldn't be driven solely by IT, but by the interests of the larger business.
Budgeting approaches for 2021
With 2020 being an incredibly unique year, there are obviously considerations and strategies to plan for 2021. Some budgeting approaches and tips include:
Budgeting is least daunting and most effective when you treat it as an ongoing process, measuring actuals on an ongoing basis and dynamically building your budget around that reality.
Once again, recognize that IT does not work alone. You need to take organizational goals into account to accurately budget for the coming year, so if the firm plans on growing by 10%, ensure that you have the budget to accommodate that.
Break down budget items by priority. Ensure you build a "must-have" budget that will cover the technology needed to keep the organization running.
Transparency is critical when planning and presenting budgets. While including some cushion can prove to be very useful when abnormalities inevitably do crop up, you never want it said that you are “padding numbers.” Ensure that you are presenting these contingency budget plans very clearly to ensure all key stakeholders are on the same page.
Of course, when building a budget, be cost-conscious and treat your organization's money as if it were your own.
Smart forecasting & vendor costs
A smart forecaster creates their budget line by line. Do your homework, and demonstrate to the other key stakeholders that you have carefully planned and forecasted for the coming year. In terms of vendor costs, ensure you're aware of any potential renewal fees, increases in licensing tiers, etc. This line-by-line approach can also give you an advantage on this side of the budgeting process, in vendor negotiations.
Reporting on performance vs. budget over time
Tracking actual costs over time not only makes next year’s budgeting easier, but can also give you an idea of how well you did when you made the current year’s plan. If you find your numbers to be accurate, on the whole, you will gain credibility for your forecasting skills. Plus, continuous tracking gives you the ability to address discrepancies in real-time vs. weeks or months later.
Benchmarking & your peers
Last, but definitely not least, is benchmarking and discussing budgeting with your peers. Often, CFOs and COOs want to know how their firm compares to its peers to ensure they aren’t left out of the latest hardware and software trends or paying more than necessary. To understand where you fall among your competitors, you can work with a vendor who is able to do extensive peer analysis for you, or build a very strong network of peers you trust. Even if you are competitors, you can truly all benefit from sharing what insight you have into industry benchmarks.