The 4 Functions Of An IT Budget That IT Managers Need To Know

Image Credit Getting the money is only the start of managing your budget
Getting the money is only the start of managing your budget

What you can accomplish as an IT manager is closely tied to how much money the company is willing to entrust you with. The more money that they are willing to give you, the more you’ll be able to get done. The way that you’ll get your hands on the company’s money is to create a budget and then manage it. Let’s talk about what you’ll need to know in order to do this correctly…


IT managers get to show leadership by starting their budget creation process by thinking about what their team is going to be asked to accomplish during the upcoming year. This is done by selecting the goals that you want your team to achieve. In most cases these goals will relate to the overall goals of the IT department or the ones that your company’s senior management have set for the firm.

Your next step will be to evaluate how you can achieve these goals. There is always more than one way to make this happen. At the same time you are going to want to take a close look at each option and use your best judgment to determine what you think the most likely outcome would be.

Once you’ve identified your options and their probable outcomes, now comes time for you to make a decision. Using the costs and benefits of each option, pick the one that you believe will have the best chance of leading your team towards accomplishing their goals.

Coordinating and Communicating

Most IT leaders will have multiple goals that they will want their teams to accomplish each year. This means that the budgets that they are creating will have multiple parts to them.

It’s the job of the IT manager to communicate to the different parts of the team that may be helping to create the pieces of the budget just exactly what the team’s strategic plan is. The goal is to have this knowledge used when creating each component of the budget.

Once each part of the budget has been created, they will need to be brought together into a master budget for your team. This is where the IT manager needs to balance and combine the different parts in order to create a master budget that reflects what he or she wants the team to accomplish during the upcoming year.

Monitoring Progress

Once your budget proposal has been approved and your team has been given the money (or at least part of) that you had requested, now you have to monitor how it’s being spent. The easiest way to do this is to compare the team’s actual results to the budget.

If it turns out that something is out of whack, then this is when you need to step in and take some form of corrective action. The official term for out-of-whack is called “variance”. This occurs when there is a difference between the actual results and the results expected in your budget. A variance can be both favorable (when results are better than was expected) or unfavorable (when results are worse than expected).

Evaluating Performance

At the end of the day, as an IT manager you need to expect to have your performance evaluated at least in part by your budgeting skills. Where you able to accurately predict how much funding your team would need in order to accomplish their goals? Once given the funding, were you able to monitor it and make sure that you only spent what you had and produced the results that you had predicted?

Your overall success will be determined by comparing the actual results that your team achieved to the budget that you created at the beginning of the year. In most companies, this will play a key role in determining your performance evaluation for the year.

What All Of This Means For You

In order to be a successful IT manager you are going to have to prove to the company that you can use its money to successfully meet goals. In order to do this you’re going to need some money and that means that you’re going to need to have a budget.

Budgets don’t just magically show up: you need to sit down and plan what your team’s financial needs are going to be. Budgets are generally made up of multiple parts and so you’re going to have collect all of the available information and create a single master budget from it. After the company gives you your money, you’ll need to use your budget in order to monitor the progress of your IT dream team. Finally, at the end of the year you need to realize that your performance as an IT leader will in part be evaluated by how well you used your budget to meet your goals.

As much as we’d like to think that our technical knowledge is what will propel our IT careers forward, it turns out that it is really our business skills that will determine how far we’ll go. Knowing how to create and manage an IT budget is a key skill that you’ll need to have.

– 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 plan on spending to create an annual budget?

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What We’ll Be Talking About Next Time

The one management task that most IT managers fear the most is the process of creating a new budget for their team. One of the reasons that I believe that this critical task is feared so much is simply because most IT managers don’t realize that there are many different types of budgets that they can create. Once you know the 3 main types of budgets that exist, picking one to create becomes much easier.