Budgeting 101: What IT Managers Need To Know

by drjim on March 22, 2012

Image Credit Before you can spend it, you need to first budget it…

Before you can spend it, you need to first budget it…

Oh, oh, looks like it’s budgeting time again. Whoever had any training in how to do this? Sure you’ve always managed your personal money fairly well, but now the company is asking you to create a budget that will take care of your team for the next year. Oh, and it’s due tomorrow. What’s an IT manager to do?

Just What The Heck Is Budgeting Anyway?

Sure we all like to kick the term “budget” around a lot, but just exactly is one? It turns out that the best way to think of a budget is to picture it as being a plan. Admittedly it’s a plan that’s based on money.

Your company has objectives that they want to accomplish during the upcoming year. These objectives filter down to the IT department and then travel even farther down to your IT team. Creating budgets is a part of the leadership responsibilities that you have as an IT manager. The budget that you are being asked to create is basically your plan for how your IT team is going to accomplish your part of the company’s objectives for this year.

Ultimately, the budget that you create is where the “rubber meets the road” – those lofty strategic goals that the management guys running the show dreamed up get boiled down into a specific action plan when you create your team’s budget.

The Four Functions Of An IT Budget

If a budget is a plan, then it’s purpose for being is not to sit on a shelf. Rather, the reason that you go to the effort of creating a budget is to provide yourself with a tool that you can use to help your dream team accomplish things this year.

The budget that you create is going to have four primary functions. Each of these functions is going to play a role in helping your team to make progress towards achieving its objectives.

 

  • Planning: What would any budget creation process be without planning? There are 3 steps that go into planning your next IT budget. The first is to choose your team’s goals. You need to know what you want to accomplish. Next you need to evaluate your options and predict your results. Not all of your options are the same and each has a different possible outcome. Finally, you need to pick an option. Use your analysis of the various costs and benefits associated with each of your options and pick the option that has the best chance of allowing you to achieve your goal.

 

 

  • Coordinating & Communicating: It’s a good bet that your IT team won’t be working on just one project during the upcoming year. Multiple projects means that you’ll be needing to have multiple budgets. Ultimately, each of these individual budgets will need to be brought together and merged into one budget for your team. Coordination is required in order to make sure that you’ve gotten all of the various pieces and parts that you’ll need. Communication will be required as you make sure that your team’s plans will mesh well with the plans of other teams in your department.

 

 

  • Monitoring: All too often new IT managers believe that an IT team’s budget is just something that you throw together at the beginning of the year and then don’t look at again until you start to put the following year’s budget together. It turns out that a budget is a tool that you can use to monitor your team’s progress. This is done by comparing your team’s actual results with the budget that you created. If things start to go off track, then it’s your job as a manager to take corrective actions.

 

 

  • Evaluating: Ultimately how good of a manager you are can be evaluated by taking a look at how well your team lived up to the plan that you laid out for them in your budget. Your performance will be evaluated by comparing the actual results of your team to the budget that you created for a given period.

 

What All Of This Means For You

When you are asked to create a budget for your IT team, there is no reason for you to panic. Instead, you need to understand that what you are really being asked to do is to create a plan for how your team is going to play a role in helping the company to achieve its objectives for the upcoming year.

The budget that you create is a plan. This means that you can use it to make sure that your team will be able to successfully accomplish its goals this year. Your plan will allow you to do planning for your team, coordinate the funding of multiple projects while communicating with other teams in your department, monitoring the progress of your team, and having your performance evaluated.

Creating and using budgets is a way of life for IT managers. Instead of either fearing or dreading this task, take the time to become good at doing it. Remember that as your IT career progresses, budgets will become an even larger part of what you spend your time doing…

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Management Skills™

Question For You: How much time do you think that it should take an IT manager to create a good budget for your team?

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What We’ll Be Talking About Next Time

Just in case you’ve been living under a rock for the past year and don’t know who Zynga is, they’re the online game company that has ridden Facebook’s coattails to success. They’ve created very, very popular games such as Farmville and Cityville and generated a great deal of money. However, it’s starting to become clear that Zynga is not very well run and this holds many lessons for IT Managers…

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