7 Pitfalls of IT Budgeting and Forecasting

Planning is painful for all lines of business—but IT Finance has it tougher than most.

Pick your (IT planning) poison. Go with a set of home-grown spreadsheets and drown in “email governance.” Or try to retrofit your IT-specific budget details into your company’s corporate planning system.

Neither satisfies the specific needs of IT budgeting and forecasting, and exposes you to the pain of a manually intensive, spreadsheet-based process.

Both IT and business stakeholders suffer the pain—and its consequences. A manual process compounds human errors hidden in an inefficient workflow. The business is blind to those consequences—budget padding that kills innovation and spend surprises that enforce budgetary “haircuts.”

Avoid these pitfalls by building your IT planning process around seven key principles.

#1 Centralization

Roll up cost center plans into one common, central plan of record.

The only way to gain complete confidence is to have everyone working from a centralized process. Adopt a single system that offers automated workflows, built-in governance, and instant access to variance analysis, plan adjustments, and forecasts. With a single plan of record, you can eliminate undocumented handshake agreements, expensive template management efforts, lengthy budget consolidation iterations, and low-value, manual data preparation.

#2 Collaboration

Cost centers work concurrently on the same plan version.

Giving budget owners greater control fosters ongoing collaboration between IT and Finance. When budget owners actively build, understand, and buy into IT plans, the entire team is better aligned to hit financial targets and achieve strategic goals.

Budget owners collaborate when they trust the tools they are using. If there is little faith in the robustness of the budgeting and forecasting, cost center owners retreat into a safety-first position and plan in a silo.

»Related content: IT Budgeting and Planning Toolkit

#3 Accountability

Capture, share and provide easy access to decision points.

To drive budget owner accountability, foster communication and engage all key stakeholders.

Start by making your IT plans accessible to everyone involved in the process. Ensure plan components are easy to identify, understand, and adjustable, and that cost center owners can interact with the budget to enter changes and instantly see the impact on their plans.

#4 Accuracy

Accuracy is the foundation for action.

Budgeting and forecasting processes may be tolerable when the number of participants is small, but it quickly becomes unwieldy as that number grows. It becomes even more challenging when the data for different areas of the budget (including capital, labor, vendors, and depreciation) come from different teams or source systems.

Through multiple iterations, justifications for budget adjustments are lost in translation, yielding a plan with little transparency, and compounded errors from version roll-ups. Errors that are often only found after budget approval.

»Related content: IT Budgeting and Planning Toolkit

#5 Repeatability

Process isn’t reinvented with every build, adjustment, or plan reconciliation.

Though an annual plan is a one-time event, it is one that you know is going to happen next year. And considering COVID-19, organizations are re-planning with dramatically different assumptions for this year. Signing up for a planning process that isn’t repeatable is an invitation to be overwhelmed with low-value data wrangling.

IT Finance spends most of its time distributing, collecting, and consolidating spreadsheets; addressing version management issues and overlooked guidance; and finding and correcting formula errors and broken spreadsheets—all diverting attention from higher-value analysis.

#6 Maneuverability

Plans become easier to manage as they evolve.

By working closely with budget owners to understand business objectives, you can better align IT investment decisions with enterprise strategic goals. The challenge is finding the time to do this.

When you eliminate manual, spreadsheet-driven processes, your team has more bandwidth to analyze future spend against strategic objectives. It’s a virtuous cycle where the time saved today is baked into the process going forward and dedicates more time for analysis—both strategic spend and the budgeting and forecasting process itself.

#7 Instant visibility

Support the rapid consumption of vital information.

Inefficiency, demand, or expanded initiatives drive IT costs. Without information to justify these costs, IT Finance looks at increased spend as a problem without a solution. If storage costs go up 30% year over year, but the unit rate of storage ($/TB) falls by 20%, IT Finance can engage in a funding debate with the business rather than a (more prickly) operational efficiency debate with I&O. IT Finance has the right conversation when they have access to the right information.

Forecasts provide current data points to inform action in the face of changing financial realities. Frequent forecasts enable stakeholders to make more informed decisions, improve plan accuracy, and adjust spend levels and allocations to support strategic initiatives.

Adopt a purpose-built IT planning solution

With unlimited time, organizations could craft an IT planning solution that delivers on these principles—but the reality of resource constraints and competing priorities makes that a pipe dream.

Our IT Budgeting and Planning Toolkit comes with an eBook, poster, and a guide—everything you’ll need to help you get started with a more accurate, agile process for IT budgeting.

We designed this toolkit to help you:

• Eliminate errors and save time
• Reduce overspend surprises before it’s too late
• Prevent wasteful padding that starves funding for innovation