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How to budget for IT costs in a small business

It’s staggering to hear that around half of the small businesses in the UK don’t prepare a formal business budget at the start of the financial year. I understand that they are time-consuming and as a smaller company, you feel that you can be far more flexible on your feet without any monetary restrictions holding you back. The truth is that better planning and focus on your end goals is not going to hold your business back. In fact, it may be the only way to sustainably achieve your goals.


There are many ways to compile a business budget. The general consensus is to determine your estimated income, identify your fixed costs, include any variable costs, try to predict any one-off spends and carefully tie it all together.

We have a tendency to overestimate our income for the coming year. This is great when settings goals but terrible when drafting up a budget. Likewise, we tend to estimate future costs as if inflation worked in reverse and never quite seem to get those right either. Be realistic with your estimations. Lower your income expectations and expect your costs to increase – it’s better to have something left over at the end of the year.


How to make sure you have IT costs covered in your budget


Before you can plan what you’re prepared to spend on technology for the year, you need to understand what you hope to achieve during this period. Yes, this means drafting a basic tech strategy. It doesn’t have to be complicated and can be as simple as identifying a need to move more services over to cloud technologies, or to build on the availability and resilience of your existing systems.

Much like predicting the spend for any department, the easiest thing to do is to keep a running tab on your costs throughout the year. The last thing you want is to be stuck spending a weekend going through 12 months of emails and invoices in the eleventh hour trying to piece together what you’ve spent. Feel free to download our simple IT Spend Tracker template here.


In addition to tracking your spending on the go, you’ll want to keep a record of your recurring contractual costs for things like software licensing, website hosting etc. Make sure you capture the vendor name and your contact, the amount and frequency with which you pay them, any associated agreed service levels you have in place and the duration of your contract. Many contracts will auto-renew so it is important to understand your renewal terms and notice periods for all vendors, so you can set yourself a reminder to review the value that the service offers to your business and if needed, shop around for something better before being tied into another long-term contract.


Remember, IT costs are both an expense and an investment. Having the right technology can improve efficiency and even give you a market edge against your competitors. Your IT strategy should always be aligned with your business goals and spending should be appropriate to the needs of your company vision.


Some further tips for creating a reasonable IT budget


Plan for the worst. It may not happen if you prepare for it, but almost certainly will happen if you don’t.

Understand that circumstances change. Whether it is the needs of the business or a sudden rise in inflation pushing prices through the roof (hmmm?). Factors beyond your control will affect your budget and sometimes no amount of careful planning can get around it. A small contingency in your budget will help you to be more agile and flexible throughout the year to adapt to events outside of your control.


There you have it, some basic tips that we hope will be useful to drive your business forward and as always, ITbuilder are here to support you on your journey to success.

Jason Abrahamse

Jason is ITbuilder's security expert and leads our information security project team. He provides consultancy and support on matters relating to cyber-resilience and data protection.

Something of an industry veteran, Jason has held various roles in the industry and combines that expertise to consult with customers on security best practices.

Jason is a native of South Africa, but is now a fully naturalised Brit except for not being accustomed to the cold. He lives locally in Hertfordshire.

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