Cassidy-Budgeting Process

Cassidy-Budgeting Process - A Practical Guide to Reducing...

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A Practical Guide to Reducing IT Costs by Anita Cassidy and Dan Cassidy, J. Ross Publising 2010 ; Extracted from DePaul 24x7 ebooks for classroom use. Chapter 2: The Budgeting Process OVERVIEW Budgets are a key management tool for all areas of a business. Understanding the budget and the budgeting process is critical before tackling cost reductions. Successfully managing IT requires more than an average level of sophistication and knowledge of budgeting. Often, IT has one of the largest budgets in an organization, particularly one of the highest overhead budgets. In times of economic pressure, the IT budget comes under significant scrutiny. Budgeting for IT is more challenging because IT is a service organization that pays for tools and items used not only by IT itself but by the entire enterprise. This chapter assumes that IT management understands budgets, how they work, and knows basic financial terminology. However, it is equally important to understand the nuances of the budgeting process, your company's culture relative to budgets, and the politics surrounding the budgeting approval process. Whether you are unfamiliar with the budgeting process or you have been through IT budgeting in the past, the following tips and practical advice will help to get your budget approved. The following areas are discussed: Budget . This section provides an overall understanding of the operating budget, operating costs versus capital costs, and managing to the budget. Financial options . This section reviews popular options, such as zero based budgeting, purchasing versus capital or operating leases, and charging back IT costs. Communication. The budgeting process provides an excellent educational tool for the organization because you will be able to communicate the IT environment and direction. This section discusses the importance of your relationship with Finance and the CFO, and outlines how you can minimize surprises or assumptions that hurt your credibility. It is important to communicate the IT budget in business terms. The budgeting process is much easier if it is supported by effective communication of strategic planning , business alignment, the impact of budget cuts, and governance. Perspective. Keep the budgeting process in perspective. BUDGET Understand the Operating Budget Operating budgets are a concrete statement of plans relative to costs. As IT does not generally produce  income or revenue, IT budgets forecast the purpose, amount and timing of projects, and operational  spending. If you are new to the budgeting process, study the previous year's budget several months  before your company's budgeting process begins. The single most important thing for you to do is to  understand the details of your budget and know your costs. Each company has slightly different budget  categories or line items, but Figure 2-1 outlines some of the categories you might find in your operating 
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This note was uploaded on 10/11/2011 for the course ECT ect535 taught by Professor Susichan during the Fall '11 term at DePaul.

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Cassidy-Budgeting Process - A Practical Guide to Reducing...

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