Top 3 IT Budgeting Mistakes Made By Small Businesses

Let's face it; most executives don't consider reviewing or creating budgets a favorite pastime. In fact, unless a budget comes by way of regulation, many businesses will tackle expenditures and investments reactively.

We see this same pattern A LOT, but more so when it comes to Technology.

Technology has evolved, and quickly. It touches every part of your business, and without it, you can run into some pretty severe consequences. And honestly, the same is true if you leave your IT budget to the last minute or avoid it all together.

So, let's go over the most common IT Budgeting Mistakes, and how to handle them.

1. Not Budgeting for IT at All

Creating an IT Budget can be more difficult than building other budgets.

If an IT manager or executive fails to create an IT budget, they're setting themselves up for a very uncomfortable conversation. It usually goes something like this...

"We have to spend a lot of unplanned money."

An unexpected IT expenditure can derail a company's profit for a month, or even a quarter, if not adequately planned for.

To avoid that, consider the positives of creating an IT budget.  

With a well-thought-out, planned, and executed IT budget, the executive team will save time and money. It will prepare you for not only the financial requirements but also any business-interrupting initiatives that may not be top of mind.

Additionally, when an unexpected failure does occur, it's a more comfortable conversation, because it's actually an exception.  Pre-budgeted expenses usually have a better purchasing cycle; meaning you're not in a hurry because of an emergency. This leads to better pricing and less business disruption to end-users. 

Moreover, creating a budget makes you more likely to view technology as a business essential, not a necessary evil.

2. Basing This Year's Budget Off of Last Year's

Many businesses create IT Budgets based on "last year" or ordinary operating expenditures.  IT hardware has an extended lifespan that is not considered when developing budgets. IT purchases usually last longer than one year, but still end up in the operating expense account. 

It's essential to have an accurate hardware inventory report with expected replacement timelines. This is essential when planning a proper budget. In the IT world replacement equipment is referred to as a hardware refresh.

The hardware refresh cycle should also consider historical AND industry data.  Items that may have lasted 3 - 5 years in the past may have a longer or shorter lifespan now, depending on the current technology. 

It is also advisable to include a little wiggle room in the refresh budgeting.  As new technology is released, the increased benefits of enhanced performance or extended life cycle may be worth the extra up-front cost.

Related: Trying to figure out how much IT support contracts cost in Southern California? Check out this managed IT services cost guide.

3. Not Including an IT Research & Development (R&D) Line Item

In the IT world, we love our acronyms almost as much as executives like their new gadgets.

If there is not a separate line item on the regular budget for research and development (R&D), there should definitely be a place for it in the IT Budget.

Whether it's a new tablet, laptop, robotic, VR device, or app, there is always a chance that the next best thing to reduce cost, increase revenue, or improve a product and/or service lies in the latest and greatest tech discovery.

Technology-focused businesses have been known to allocate a monthly budget for their in-house innovation labs where all employees are allowed to develop, test, and try out new gadgets and establish a business use case for their subject.

If there is anything we can count on, it's that technology will continue to develop and disrupt the business world. As Benjamin Franklin once said, "If you fail to plan, you are planning to fail!" Don't let your failure to plan and budget for IT be the cause of your budget failure.

Want help putting together an IT budget that eliminates expensive surprises? We're happy to chat anytime. Give us a call at 800-481-4369