Real SMB IT:Your First Zero Based IT Budget Pt 2

June 4, 2010

This is the second post in this series for getting a handle on IT spending by doing a complete zero based IT budget. Again, the target for this post  is CFO’s (or other SME executives) managing IT where they have lost visibility of IT spend,  and also IT staff just promoted to that first IT Manager position.

In the first post, I started off with many of the details you need to collect that will allow you to determine what you actually spent (both CAPEX and OPEX) last year. (If you are  newly promoted IT staff, yes there is a reason why we want to start in the past!)

This second post will finish off the details needed to get a reasonably accurate description of your actual IT spend for the previous fiscal year.

So, in addition to the details you collected from part 1, document and include the following;

  • IT salaries, fully loaded. If you are a new IT Manager and don’t have the exact salaries and load rates,  get a fully loaded summary from your finance team.
  • Telecommunications. Your business may choose not to include telecommunications costs under the IT umbrella, but I will recommend that most SME’s should consider it. Simply because most SME’s don’t have dedicated telecom charts of accounts either.

Now, with the details you have been collecting from the previous post, plus these new ones, ensure that there is a breakdown of these costs. A cost basket of  Services is unacceptable. A heading of Services with a breakdown of what is the level of detail that we are looking for.

At this point you will have a spreadsheet breaking down;

  • Recurring fees (hardware, software or services)
  • Non-recurring fees (hardware, software etc)
  • Consulting / services / support / training
  • Hardware / Parts
  • etc

If you are a CFO responsible for IT, like many SME executives, you will now be going good god!!! We spend WHAT!!!??

You will also have shortness of breath, dizziness, and an increasing sense of panic. Clear signs of a coronary.

My recommendation is that you hit the gym for an hour, or have a few stiff drinks at lunch, and then revisit.

Feeling better?

We have not reached the forecast for the next fiscal yet, but if we look closely – there is a wealth of information in this summary of your previous years actuals.

  1. Look at the services. Still need them all? Anything there that has not been used in years? Anything that has become such a low value add that you can look at replacing?
  2. Recurring fees – especially software – many of us have been forced to cut staff in this recession. Are you paying fees for more staff than you now have?
  3. Look closely at those ‘miscellaneous’ parts and supplies. If those are hitting the the dollar value of a FTE, you have structural problems, either through your purchasing process,  or in your TCO (total cost of ownership) planning
  4. Non-recurring fees, hardware or software. There may be circumstances where 100% of your staff need that expensive software. But perhaps 20% need it while the rest just think it is a nice to have. As an example, you create PDF files? Adobe Acrobat Standard version does 90% of what the Professional version does, yet is almost half the price.

Next post in this series will start to dive into the forecast part of this first zero based budget!

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2 Responses to “Real SMB IT:Your First Zero Based IT Budget Pt 2”

  1. elliotross Says:

    Ok – thanks – Will try and have a look this week!

    Regards & thanks for dropping by!

  2. Steve Leigh Says:

    Really liked both of these posts. There’s more like this here

    Tips from tech bloggers and journalists on planning your IT spend. Worth a look.

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