Although business owners are well known for cutting costs wherever they can, we sometimes meet with entrepreneurs who make a habit of overfunding their IT budgets. Why would anyone with a growing or successful business do this? And is there any reason for you to follow their example?
As to reasons why you would set aside more money than you think you need for technology, we have found it usually comes down to a couple of things. The clients we meet with who follow this practice say things like:
- “IT always ends up costing me more than I expect anyway. So I figure I should just put something extra aside.”
- “Sometimes I find that there are things I want for my business, like phones or tablets, that I didn’t account for. So I leave something extra in the budget and buy them.”
These are reasonable concerns. However, we think you can address them without overfunding your IT budget. The solution is to work a better strategy with regard to your technology spending. Here are a few things you can do today to make your IT spending forecasts more accurate and reasonable:
Adjust Your Budgets (and Budgeting Process)
If you always end up spending more than expected on technology, then the answer isn’t to overfund your IT budget; it’s to change your IT budget to reflect reality. In other words, just acknowledge that you have higher operating costs and deal with those figures.
Alternatively, you could change providers and switch to a managed services plan like the ones we offer. Having one would allow you to pay low monthly or quarterly costs for the support you need, making your expenses more predictable. You could also budget for IT for the next quarter, instead of the next year, to make it easier to anticipate near-term expenses.
Plan for Equipment Replacements and Upgrades
On the one hand, it’s good to always be thinking about the ways you can use technology to grow your business (or just make your life easier). But on the other hand, you don’t want to get in the habit of constantly overspending on new gadgets and apps.
By creating a clear upgrade path for your current technology, you accomplish a couple of important goals. First, you make your budgets more stable and predictable. Second, you avoid the trap of buying things you don’t need – or that are incompatible with one another – just because a good deal is available in the moment.
Consider Keeping an IT Emergency Fund
Still think you might need something extra in your IT budget after taking these steps? Rather than regularly overfunding your technology accounts, consider keeping a dedicated “emergency fund” for IT expenses. That way you can always be sure you have the cash on hand for whatever you might need.
Hopefully, you’ll never need to dip into this emergency fund. If you do, though, you can always create a budget that allows you to replenish those backup savings rather than spending randomly on technology.
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