Most Technical Managers need to manage a budget and in a lot of cases System Managers and Network Administrators are also managing a budget or at least part of the annual budget. As technical folks we can often get caught up in the day to day technical complexities of our jobs and overlook or procrastinate over the budgeting and purchasing process. This is an area where most technical folks could improve.
I have been in the Computer industry for 18 years and I was lucky enough to have a mentor who stressed planning, budgeting and purchasing. My mentor showed me that justifications and actual business need, can go along way in the purchasing process, however having actual budgeted dollars almost always ensures that you will be able to purchase when the need arises. Eventually, everyone has to make an unbudgeted purchase; however, by limiting our number of unbudgeted purchases, we increase our chances to pushing one or two unbudgeted purchases through the process.
Why is this important? Better planning, budgeting and purchasing will allow you to stay current with hardware and software revisions, which translate into better support for your company. It also enables you to stay current with the new trends in technology and provides more technical toys for your folks to play with, and from a Managers perspective, this leads to more motivated employees.
I have outlined the process that I follow for Budgeting and Purchasing and wanted to share it with everyone:
1) Understanding the budgeting and purchasing process is critical
a. You need to identify what is required for the purchasing process and in particular, which signoffs and justifications are required as part of the purchasing process.
b. You need to understand guidelines for expense and capital purchases along with non-budgeted purchases.
c. You need to understand the budgeting process and in particular understand when you will have input and feedback into the process.
2) Once you understand the process, use the process to your advantage.
3) Start with the Budgeting Process, and do your homework. Start early and be prepared.
a. Plan for the essentials like Ongoing Hardware and Software Maintenance
b. Plan for soft costs like Salary costs, Travel, Training and Expense Costs
c. Plan for New Hardware and Software Purchases - Consider applications that are in need of upgrade. In most cases plan for both Hardware and Software upgrades on applications more than 3 years old.
d. Plan for New Projects or Project Improvements. - Again, consider both Hardware and Software
e. Plan for Telephone and Network Bandwidth costs
f. Plan for Consulting Expenses
4) Now create a wish list, think out of the box and identify all solutions that will help your group better support the company. Consider everything from the most outrageous to the most practical.
5) Now make a list of all items and contact your vendors. Ask for a quote for each requirement, and explain to the vendor that this is for budgeting purposes and ask that they deliver a non-discounted quote.
6) It's OK to create placeholders for projects or items, however if placeholders are not acceptable in your company then you need to pad your budget by adding extras.
7) Look at what was spent the year before and add 20% to your previous years cost. Make sure that your budget that you deliver is at least 20% greater than your current budget. Most companies look at your track record and appropriate according to past years.
8) Now, write your justifications. Having your justifications written beforehand will work to your advantage. On two different occasions, my manager has come to me at the end of the year and said we have extra money that we need to spend before the end of the year. In each case, I had the Purchase Requisitions, quotes and justifications on his desk by the end of the day, and all purchases sailed thru the purchase process. In each case, I was able to purchase the equipment in the current year and the funds we still budgeted the following year.
9) Talk with Manager or superiors about each line item. If you have the justifications, share them with your Manager. I have also created a summary document of condensed justifications that referenced all justifications. In most cases, once you submit your budget request, you have little feedback into the process, so you need to make sure that your manager understands each line item. You need to communicate which line items you really want to protect and which items you could live without for this budget cycle.
10) From the purchasing perspective, you should know that a purchase will sail through the process before you write the Purchase Requisition. If you are unsure then you need to talk with all parties that require signoff and let them know that you are submitting a Purchase Requisition and why.
11) Also, from a purchasing perspective, you need to manage and record all purchases. I am asked many times during the year if my purchases are on time and consistent with the budget. I am also asked for a quarterly summary of purchases, and provide a list of what was spent in the quarter and what I intend to spend in the next quarter. Establishing a track record of purchases goes a long way toward justifying purchases in subsequent years.
Finally, I realize that most companies have different policies toward budgeting and purchasing and you may not be able to apply this entire process in your environment, however I would suggest that you take a look at your process and compare it to this process and think about how you can improve the purchasing process for your environment.
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