IT Managers Need To Know: What Is A Master Budget?

Image Credit A master budget brings together all of your other budgets
A master budget brings together all of your other budgets

Who out there likes to create budgets each year? Probably nobody – it takes a lot of work! I’ve got some good news for you, there might be a simpler way to do all of this. All too often IT managers sit down and try to create a single master budget. This can be very hard to do. I’ve got a better way for you to accomplish the same thing in a much shorter amount of time!

What Is A Master Budget?

So just exactly what is this master budget thing? It turns out that no IT team works on just one project during a year. What this means is that your job as an IT manager is instead of trying to sit down and create a single master budget, you need to show some leadership and create a separate budget for each of the projects that your team will be working on.

The trick here is that the company doesn’t really want you to submit a handful of budgets for your team. Instead, they are looking for you to turn in one single budget – a master budget if you will. This means that once you have the budgets for all of your individual projects, you need to combine them into a single budget that incorporates the funding, resources, and returns that all of your projects will require.

Your master budget will summarize the financial projections of all of your team’s individual projects during a given period. This means that the master budget will need to incorporate both your operating budget as well as your financial budget.

3 Questions To Ask About Your Next Master Budget

If combining the numbers that you’ve created for your individual budgets was all that was required in order to create a master budget, then you could turn it all over the finance department and be done with it. However, as with all important things in life, it’s not this easy.

When you submit your master budget to the powers that will eventually grant you funding with which to accomplish all of the great things that you and your IT dream team want to accomplish in the upcoming year, it will be reviewed. This means that you have an additional step that must be performed before you turn your master budget in.

There are three questions that every IT manager must ask about their master budget before they submit it to their senior management for final review and funding approval:

  1. Alignment?: In IT we talk a lot about aligning the work that we do with what the rest of the company is trying to accomplish. These are fine words, but they really take on a great deal of meaning when we are dealing with budgets. As an IT manager, you need to review your master budget and determine if the projects that you are trying to get funded will fit in with the larger strategic goals of the company.
  2. Resources?: There’s an old phrase that says that you can’t get blood from a stone. What this means for IT managers is that before you turn in your master budget you need to determine if the company has the resources (including cash) to fund your master budget. If you are asking for US$100M and the company only has $10M to spend, then things aren’t going to work out.
  3. Value?: You are proposing that the company fund your IT team to do some work. The big question here is if it is going to be worth it for the company. Will the work that your team performs generate enough value for the company to allow it to achieve its goals?

What All Of This Means For You

Every IT manager is asked to create a budget at some point in time – generally on a yearly basis. This can be a challenging task that takes up a lot of your time. However, it doesn’t have to.

You need to understand what a master budget is. It is a single budget that brings together all of the individual budgets that you’ve created for the various projects that your IT team will be working on in the future. This single budget needs to align with the company’s goals, identify the resources that you’ll need, and determine if you’ll create enough value to make it all worth your while.

Taking the time to create a master budget is one of the core responsibilities of an IT manager. Using the divide-and-conquer strategy for building the budget while answering the 3 questions that we’ve identified will ensure that your next master budget will be right on the money.

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

Question For You: How much time do you think that an IT manager should allocate for creating a master budget?

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What We’ll Be Talking About Next Time

For far too long the role of IT managers within many companies has been almost an afterthought. Sure they all had IT managers, but unless the company was part of the IT sector then the IT manager was mostly relegated to making sure that the corporate email system was working, he or she was not considered to be an important part of the company. However, there is one industry where this is not the case – IT managers are being viewed as the key to the company’s long-term success. Which industry you say? It’s the power industry. Let me explain…

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