..and the pounds look after themselves. So the old saying goes.
Yes it’s that time of year again; time to think about next year’s budget. Our company financial year runs from 1st Jan to 31st Dec. The FD needs to check it over and approve it and he needs some time to cook the books (sorry, prepare the COA), so we need to get budget plans drawn up a few months before December.
I tend to start by writing a list of the specific jobs that we intend to do, plans to replace major hardware such as UPS or servers, major software upgrades like the move to Windows XP a few years ago. It can also include work that we think we will be required to do; currently we are waiting for the go ahead on new offices and they will have to be cabled up. I try to get a quote so that we have a fair estimate of the cost.
We have a lot of specialist software for CAD drawings etc. and these have quite expensive support costs. Added to that is the support costs for CRM, ERP and so on. In some cases, I think that it would be useful if these were in a separate budget, but they are not so I just have to get on and deal with it. I also add in an amount for other software upgrades.
The next step is to think about smaller hardware purchases; monitors, disks, cables, replacement printers etc. I also consider consumables; toner cartridges, disks and batteries. I try to work out what we have bought / used in these areas, then use that as a benchmark for the next year.
We also need to plan for Business Continuity / Disaster Recovery. This requires that we keep some spare equipment, pay towards a BC / DR partner and take appropriate actions to make sure that we can be flexible enough (and secure enough) to put things into place at short notice to allow the company to deal with sudden problems.
Once all of these items have been assessed, I put them into a spreadsheet. I tend to leave details on the form so that the FD can verify it; the more detail the better as it saves him pestering me. It also means that he sees part of the justification for the spending which gives him confidence that I have thought things through.
In our case, I also try work out roughly what we are likely to spend on travelling to work at our other sites; hotel, mileage allowance, flights as appropriate. In addition, I also added an allowance for some training costs as we have had to learn a lot of new skills around our ERP system and the training is absolutely essential. As it happens, the FD generally accepts my figures (although he does occasionally make some changes to match his numbers).
After all that however, the big thing is to try to stick to the budget. Sometimes this is easier said than done. Generally, the smaller amounts are easier to offset within a budget. For example, someone managed to destroy a laptop a few years (he ran over it; he forgot to put it in the boot of his car!) and we needed to replace this at short notice. We could just put that down as a replacement and not worry about it.
However, it is also possible to get a requirement for much larger items – we had to buy an add on disk unit for a server which had not been budgeted for – not the end of the world, but it meant we had to be a bit careful about some other spending.
But all in all, it seems to work for us. The FD is happy, the MD is happy, the staff are generally supplied with what they need, when they need it. We get to manage things ourselves, which is a lot better than having to justify every single item of expenditure. I’ve seen places where this happens, and I would not like to have to be working under those conditions.