When midyear arrives and you're trying to figure out how you can already be over budget, you can rest assured that you aren't the only IT manager who has no hope of rectifying the budget by year-end. For a number of reasons, IT managers often fail to hit their budgets, but it doesn't have to be that way.
Here are some of the more common reasons that IT managers put together weak or unrealistic budgets, along with numerous tips on how you should go about creating your budget and what it needs to include to make sure you aren't sweating it by year's end.
Reasons budgets are missed
Here are the primary reasons managers miss their budgets.
- Managers don't know how to budget: For the most part, IT managers aren't taught how to budget. Budgeting is one of the least-liked aspects of running an organisation, especially for a technically-oriented person, so it doesn't get a lot of attention.
- Managers don't understand the financial aspects of their businesses: Too many managers don't take the time to review and understand the financial dynamics of their businesses. In most cases, there are only a half dozen budget categories that tend to make or break you in any given year.
- Managers don't make the proper effort: Because most of us hate to budget, too many of us don't make the effort to gather the information we need to develop an effective and achievable budget.
- Managers want to turn in -desirable" budgets: The scenario goes like this: The CEO asks for the budget and expects it to include many of the project initiatives discussed in various meetings. Once the first draft is submitted, the CEO asks for a reduction of expenses by most departments as he tries to get the overall budget in line for the Board of Directors. Budget -tweaking" is normal. The problem exists when the manager cuts his expenses but doesn't reestablish expectations of what services or deliverables have to be cut to achieve the new plan. Fail to realign expectations at this juncture, and you are a -sitting duck".
- Managers submit -perfect" budgets: This occurs when the manager does his level best to submit a budget that's perfect. He spends hours gathering the details for all the projects, goes through exact calculations for salaries, increases, and benefits for his staff, details every new project planned for the new year, and submits a budget that is -exact." The problem is that a budget is a forecast and should not be so exact that there's no room for error. -Perfect" budgets are almost never achieved.
- Managers fail to manage expectations throughout the year: It's normal for companies to alter plans during the course of the year. Too many managers sign up for the new business needs but fail to adjust senior management's expectations on the impact those new needs will have on the original business plan. Unless you tell senior management otherwise, you'll be expected to complete the new initiatives, as well as the original plan, all within the original budget. It's your job to manage senior management's expectations.
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