IT Budgeting -Part 1: Accounting Heresy
Budget time is likely not any IT manager’s favorite time of year. It’s long, drawn out, frequently disappointing and pulls you away from your primary focus, managing IT. But if you don’t pay attention to any of the details your team will suffer for your oversight. So perhaps it’s time we pose the question. Is budgeting, in the traditional sense of the word, still really a worth wild endeavor?
Now before we get too far down the rabbit hole, let me qualify my first paragraph. I realize that for many IT managers, working in corporate offices, such a paradigm change may be nothing short of an impossibility. The fact is that a corporation exists to make the stock prices go up (ostensibly by making a profit, but that’s a different article). Investors by nature are fairly skittish and a major change in the way a corporation handles its budget may send investors running which can put even a profitable company in danger of tanking. However, there are many IT managers working for private companies. So, perhaps a change in the private sector might help the Street become more comfortable with a new idea.
Why Budgets don’t work:
Managers lie. It’s understandable. In a company money is a valuable resource. With a reserve of cash managers can add heads, buy new tools and equipment, hire consultants and generally get things done. Thus when it comes time to make that annual budget the temptation to add a little padding to the plan can be just too tempting to pass up. As the budgets roll up, each team’s little bit of padding can amount to a significant over inflation.
Accountants aren’t dumb. Accountants know that manager lie. Hate to burst your bubbles, but all your creative shell games are old hat for seasoned accountants. Sure you might slip one in every once in a while with a new creative tactic. But don’t expect to slip through the same loophole twice. Submitting a budget is just the first round of scrutiny the numbers will go through. Accountants will squeeze the budget ask for cuts, come back with demands and sometimes a flat no. It forces those managers who, in good faith, did not pad their budgets to lose critical resources. And even after weeks of work and re-work it’s unlikely to squeeze out all of the padding.
They’re inefficient. Creating a budget takes time and no budget is created in a vacuum. An annual budget plan requires every team in the company to spend at least some time drafting, reviewing and revising their budget. The higher up in the organizational structure you go, the more attention must be paid to it. You can spend weeks of senior leader’s time locked up in budget debates every year. These are likely the last people you can afford to lose for an extended amount of time.
Beyond this, it’s unlikely that even a well-researched plan can withstand the unknown of the business world and come out unscathed. Experienced financial analysts spend weeks of time looking at major patterns and try to extrapolate it down to the daily needs. Not unlike weather men who see an El Nino system and try to determine which days it will rain for the next year. We all know how well that works!
During this series we’ll explore why understanding what’s at stake during this time of year can literally cripple your ability to help your team, your customers and ultimately the business. We’ll also touch on how and why you should shift the paradigm from the traditional budget process to a new way at looking at managing business finances with a focus on staying flexible while creating dynamic plans for the future. We’ll focus on what technologies you can leverage to help usher this change to fruition and look like the hero. Please join me next week as we look at IT Budgeting: Part II.
-Special thanks to C. Black input and insight during the creation of this series.
