Budget Metrics - An Effective Means of Measuring Fiscal Performance

This may very well be the dumbest article you have ever read in your life. It may seem so obvious that you will want to laugh. However, you have no idea how many companies I have worked with that do not operate with budgets! While this may be acceptable for a small mom and pop operation, you have to be crazy to operate without budgets.

Your company is likely divided into some kind of departmental structure. I am not saying that this has to be a rigid structure with no flexibility, but there is likely some kind of division of labor. These labor divisions, also known as departments, should have individual budgets. This does not mean that the department will spend 100% of the allocated budget but they should know what their financial constraints are on an annual or, at least, quarterly basis. Also, when the situation merits, you need to be able to go over budget too. Flexibility is the name of the game. Microsoft had a good advertising campaign talking about the "agile business." You need to cultivate that mentality in your business to survive in the modern economic environment.

But even if you refuse to provide budgets for your departments, then at the very least, the IT department must absolutely have a budget. Why? Information technology systems are constantly in need of updating and refining. These systems require monitoring, development and training. The most effective way to maintain your business technology systems boils down to effective long-term planning. The assigned budget allows the IT department to better plan for updates and roll outs of new services to your staff when they know exactly what constraints they operate within.

Once your IT staff know how much money they have to work with, they are better able to plan how, when and what technologies they will be able to deploy throughout your business. If they need to run to you every time they need to buy a keyboard then all they are doing is wasting your time and their own. If you don’t trust your IT team enough to let them manage a few dollars of your money then you have a bigger problem on your hands then you could imagine.

Obviously, this also means that you must establish metrics for accountability. Work with your IT department head to develop a simple series of measurements that can be used to gauge the effectiveness of spending on new technologies. Such simple metrics as server up-time, increases in employee productivity due to system upgrades, overall decline of junk emails, and other such easy to measure means will serve as intelligent indicators. By blending the results of these metrics and the resulting budgetary spending you will get a clear picture of whether or not your IT department is spending wisely.

By implementing a simple, common sense approach to budget testing practices, you can rapidly determine the effectiveness of your IT staffs ability to effectively plan for the long term.

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