Budget

Cost Justification

What is a Budget

Assigning specific amounts of money to specific areas in a fiscal year

Key Budget Items

• Personnel– Salaries, Benefits, Bonus, Training

• Hardware– Upgrades, Maintenance, New/Replace

• Software– New, License, Upgrades

Key Budget Items (cont)

• Telecommunications– Lines, ISP, Web providers

• Supplies– Paper, toner, etc

• Travel

• Misc– Books, Memberships, Postage

Key Budget Items (cont)

• Depreciation– Hardware, software

• Physical Plant– Furniture, cabling

• Outside– Hot sites

• Overhead– Telephone, utilities, rent

Budget Process

• Begin 2-3 months prior to fiscal year

• Get variety of input, viewpoints

• Defend your budget– Use business terms– Avoid line-by-line

• Compromise

• Revision during fiscal year

How To Expense

• Capital Expenditure– Useful life over many years– Depreciation– Listed as an Asset

• Expense– Value gone in short duration

• Recurring Cost

Lease/Buy

• Lease– You do not own but– Still responsible for maintenance– Expense only– Termination options:

• Send back at end

• Extend Lease

• Buy Equipment

Lease/Buy

• Lease Advantage– Predictable payments– Limited cash flow– Allows for predictable turnover

• Lease Disadvantage– Upgrades may not be included– Tracking equipment– Not an asset

Budget Key Factors

• Growth

• Technological Change

• Staffing

• Hardware/Software Maintenance

• Contracts/Warranties

• Business Objectives

Cost Benefit Analysis

• Identify cost and corresponding benefits

• Tangible versus intangible benefits

Cost Benefit

Acquisition Costs

Operating Costs

Reduced Expenses

Increased Revenue Opportunities

Intangible Benefits

Overall Budget Objectives

Cost Containment

Productivity Support

Competitive Enhancement