Title: A Strategic Approach to IT Budgeting: How Organizations Can Align Technology Spending with Their Overall Mission and Goals
Abstract: Organizations of all types struggle with information technology (IT) budgeting. This often happens because the IT team doesn't understand the budgeting process and the finance team doesn't understand IT. CPAs, whether in public practice, business and industry, the not-for-profit sector or government, can remedy this disconnect by changing their organization's approach to IT budgeting from merely an annual it fit exercise into a meaningful planning and ongoing management process. This shift requires more than just throwing numbers onto a spreadsheet. It demands that an organization's leaders work together to define IT's role in achieving the organization's objectives--transforming IT from a cost center into an investment. GOOD IT BUDGETINC IS LIKE GOOD FINANCIAL PLANNING If you look at IT spending as an investment in your organization's future, you may see that effective IT budgeting has much in common with personal financial planning. To give appropriate savings and investment guidance, personal financial planners first must understand their clients' shortand long-term goals. The same holds true for CPAs working on an IT budget. Only after gaining an understanding of the organization's short- and long-term goals can CPAs help ensure that the organization is aligning its IT strategy with its business strategy, resulting in the right IT investment decisions. Personal financial planners must consider each client's short- and long-term constraints--for example, is the client's ability to save or invest limited by current earnings, deduction limitations or even current life-stage expenses (for example, school costs for children)? A similar concern with constraints applies to IT budgeting. What is the organization's cash flow? How will IT spending impact the organization's overall capital and operating budgets? Are any major projects occurring that might impact the IT infrastructure? Remember to consider both the financial and non financial implications of IT-related initiatives. Good financial planning considers the human dement of each client's life. What is the client's current lifestyle, and what is the client's expected lifestyle upon retirement? Is the client willing to make changes in his or her current lifestyle to provide for a different lifestyle upon retirement? The human element also is one of the key, and most often overlooked, aspects of IT initiatives. Is the organization making other changes that might impact its employees' ability to absorb a new computer system or other IT investment? How would an IT initiative affect employees' work lives? [ILLUSTRATION OMITTED] Good personal financial planners help clients look at various investment options and savings strategies to determine what makes the most sense based on each client's life stage, risk tolerance and savings ability Financial planners discuss multiple investment and savings scenarios with clients to determine what best meets their shortand long-term needs. From this process comes the final financial plan. CPAs should develop their organization's IT budget in much the same way. They should use multiple versions of the IT budget to analyze technology options and their associated financing strategies. They should look at each IT initiative as an investment option, the timing and execution of which affects the overall IT budget. They should consider different timing or initiative phasing to identify how different execution scenarios might impact the organization's IT budget and cash flow ALIGNING THE IT BUDGET WITH THE ORGANIZATION'S STRATEGY Once a client's individual investment and savings options have been selected, good financial planners look at the plan as a whole to determine whether it will achieve the client's financial goals. The IT budget works the same way Once IT initiatives have been evaluated and incorporated into the budget, organizations should take a step back from the details and look at the big picture. …
Publication Year: 2012
Publication Date: 2012-03-01
Language: en
Type: article
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Cited By Count: 3
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