5 Steps to Creating a Solid IT Budget
Building a workable IT budget doesn’t have to be an overly complicated process. It is, however, a critical step in ensuring your business invests in the right IT to meet your needs — not just now, but going forward.
To help you get the ball rolling, here are the 5 basic steps you need to take in order to build an IT budget that benefits your business.
Step 1: Build your IT inventory
Use a network scanning tool to identify all the IT assets in your system—every laptop, company phone, switch, wireless AP, etc. Make sure to include core IT infrastructure like servers as well. Leave no stone unturned. Then use your employee roster to catalogue all IT assets assigned to your team members, and cross-reference that list against your network scan results.
Network scans and employee checks only get you so far, though, which is why you now need to review all the IT assets you’ve purchased in the last 10 years to see if they’re still in use, whether they’re still within their recommended lifespan, and if they’re actually still necessary to have.
Finally, we recommend using a tool like Asset Tiger once you’ve completed the previous steps and have built out your asset spreadsheet. That way, you can more easily keep track of all your fixed assets (including computer equipment) going forward.
Step 2: Know your expenses
Look at your Profit & Loss (P&L) reports from the past five years and catalogue non-capital IT accessories like monitors, printers, webcams, docking stations, keyboards, and scanners. You’ll also want to catalog all vendor-provided IT support and consulting fees, including those paid on a retainer or hourly basis.
When you consolidate all these expenses and combine them with your IT inventory data, you get a clear picture of your current IT operating costs. You now know:
- Every piece of IT hardware your organization owns
- Who is using what hardware
- When that equipment was purchased
- All the peripherals your teams rely on
- Every software subscription you’re currently paying for
- How much you’re spending on IT support, whether internal or outsourced
Step 3: Create a replacement schedule
Cross-reference the purchase dates from your accounting records for every piece of IT in your organization. This will make it possible for you to chart out what’s still viable, what needs replacing, and when those replacements should be made. In general, IT equipment lifecycles break down like this:
- Laptops/PCs are good for 3-5 years
- Network equipment and accessories, 7-10 years
- Physical servers, 5-7 years
- Firewalls and battery backups, 4-6 years
Once you have your replacement schedule completed and know what needs to be changed out and when, you now have the foundation for both your current IT budget and the forecast one.
Step 4: Build your IT operating budget
Sit down with your department heads to review the IT expense report you’ve created. Your goal here is to ensure accuracy and develop a list of necessary changes for the next two to three years. This means getting answers to questions like:
- How much are we expecting to grow in the next few years?
- Are we happy with our current IT tools, or do we want to change what we purchase/subscribe to?
- What new technologies are we interested in exploring?
- Is our current IT vendor meeting our needs?
Some of this process will need educated guesses. Now that you have the data on the IT assets you own and when they should be replaced, you’re in a good position to chart out the next couple of years.
Step 5: Build your IT capital budget
This budget will cover five years ahead, and to get things rolling, you need to use your IT replacement schedule as a guide for when you will need to purchase new equipment.
If you bought new laptops for your teams last year, you’ll want to plan to make another investment four years from now at the most. In addition, don’t forget to budget for new employee costs related to growth in headcount, as well as the estimated labor costs associated with bringing in new physical equipment.
Finally, request quotes for your upcoming replacement hardware from your IT vendor or internal IT department. Add that into the mix, and you’ve got yourself an IT budget for both the now and five years into the future.