However, creating a budget for accounting IT services is difficult because your information could be inaccurate, or you could lack the right set of tools and resources to implement feasible budgets.
Regardless of the complexities involved, an IT budget is the most effective way to keep your business’ IT finances and strategies on track. With that in mind, here’s how to think about setting an IT budget.
Your IT services for accounting budget is an investment, not just an expense!
First, to understand how to set a budget, it helps to frame things in a proper light.
Your IT budget is an investment, not just an expense.
That distinction is important because it’s tempting to view expenditures in the short term without factoring the return on investment into the equation. But that’s shortsighted, and ultimately, inaccurate because it doesn’t capture true value.
IT spending is an integral part of running a successful business because IT spending can increase staff motivation and ensure that you can meet business objectives.
How do you make a good IT budget?
In truth, there’s no set-in-stone standard for IT budgeting — the needs of businesses are too varied for that. However, your business must consider a series of factors to determine your firm’s IT requirements and align them with budget allocation.
- Capital Expenditures vs. Operating Expenditures
Is your IT services for accounting budget going to be composed of capital expenditures or operating expenditures? Capital expenditures are the funds spent by organizations to either acquire new assets or improve the quality of their existing assets. Operating expenditures, on the other hand, are smaller monthly or yearly payments with a long-term commitment.
As IT moves to the service model, more businesses are choosing to budget for operating expenditures. The value of operating expenditures, of course, is that they tend to come with less risk (and less upfront cost). Due to those factors, they may also be easier to pitch during budget meetings.
Tactically, one of the first factors to consider is the level of security that will be needed for your organization.
Questions to answer:
- Do you have secure systems with a backup and data recovery plan?
- How will user access be controlled?
- Are you handling sensitive data?
- Are there regulations that you must comply with? For instance, medical organizations must factor in the cost of HIPAA compliance.
It’s important to note that just meeting the minimum-security standards is often unwise. The costs of a ransomware attack or data breach are far greater than investing in better security mechanisms.
- System Accessibility
Related to security is system accessibility. After all, the right people need to be able to access your IT systems — and hackers need to be kept out.
A few considerations:
- How will users access the systems?
- How many users will your systems have?
- Will you need to customize user roles and access?
- Where will users be accessing from? For instance, remote workers may require certain configurations that on premise workers won’t need.
- Storage Needs
Another factor that will influence the budget is storage needs. Storage involves securely storing and managing business-critical infrastructure such as data systems. This can vary greatly based on a host of considerations:
- How much data does your organization process?
- Does data need to be stored on premise or in the cloud?
- What systems need to be backed up and how frequently?
- How long does data need to be stored?
- Company Size
The size of the organization is one of the more straightforward IT services for accounting budget considerations to make. Generally, bigger organizations entail more complexity due simply to the greater number of system components and workstations. However, as a percentage of the budget, larger organizations may actually require slightly less spending on IT.
A very general guideline is that mid-sized businesses spend 6 to 7% of their budget on IT, while large companies spend 3 to 4%. Again, though, those numbers are nowhere near set in stone and will vary across businesses and industries.
A few considerations:
- Your organization’s technology purchases and possible links with other companies
- How many workstations are there?
- How many users?
- How many office locations?
- Future Needs
Last but not least, future needs are essential factors in allocating IT budget. It can be tempting to budget for the short term, allocating only toward immediate needs – but it’s unwise. As an investment, IT needs must be considered in the long-term.
There are two main long-term considerations to make: technology and business growth.
There’s a common misconception that technological infrastructure is a once-and-done investment – meaning, once you purchase a laptop or server, you’re set for six or seven years.
The reality, though, is that technology changes quickly. We recommend refreshing hardware components every 5 years. Software, too, changes quickly, and updates need to be accounted for in IT budgets.
- Business Growth
If your business is growing, the IT solutions that fit now may not fit next year. Failing to plan for growth can result in issues like failure to discover and tap into new market opportunities, poor resource management, stagnation, and poor customer growth and retention. Your IT systems will struggle to carry a burden they weren’t designed to.
We’ve witnessed small businesses go from six people to 25 within the span of a couple of years. The reality is that the systems they start with (Gmail, or consumer versions of cloud applications) simply can’t carry a business past a certain point.
So, don’t limit budget considerations to the immediate context. Make sure to consider future needs.
Choose the Ideal Budget for Accounting IT Services
Hopefully, these factors to consider when creating an IT budget for your CPA firm will help you to allocate resources in a way that best meets your needs.
If you want to be sure that you’re aligning your budget correctly, don’t hesitate to get in touch.
We’ve found that businesses can often struggle with IT budgeting and have a hard time transforming their IT departments from cost centers to investment centers.
Alavanca Systems helps businesses of all sizes unlock value by addressing their IT budget inefficiencies. Our tailored solutions address real business IT budgetary issues to achieve accounting IT efficiency. We can help you craft and implement an IT budget that aligns with your technology needs, financial situation, and one that reflects your business goals.
IT services for accounting budgets can be difficult, but Alavanca is here to help you work through precisely what expenditures will drive the most value for your business.
Ciro Cetrangolo is an IT specialist with over 30+ years in the IT services industry. Ciro has a deep understanding of the software, workflow, and underlying technology of accounting organizations and helps firms like yours achieve the secure, stable, and streamlined IT environments you need to accomplish your work more effectively. See my Amazon Author Profile