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Why IT finance needs a better way to budget and forecast

Time is a precious commodity -- there’s always more work to do than time to do it. This is especially true for IT finance professionals during budgeting and forecasting cycles.

However, according to Harvard Business Review, it’s possible to free up significant blocks of time by focusing on value-added work and eliminating or delegating unimportant tasks. According to HBR’s research, knowledge workers spend an average of 41 per cent of their day performing discretionary tasks that offer little personal satisfaction and can easily be handled by others.

“We instinctively cling to tasks that make us feel busy and thus important, while our bosses, constantly striving to do more with less, pile on as many responsibilities as we’re willing to accept,” writes HBR. “Knowledge workers can make themselves more productive by thinking consciously about how they spend their time; deciding which tasks matter most to them and their organisations; and dropping or creatively outsourcing the rest.”

To apply these lessons to forecasting IT investments, budget owners need to start by identifying top “time sinks” and how you can focus on the tasks that add the highest business value.

Where does the time go?

1. Creating budget templates and consolidating spreadsheet files.

Today, building baseline budget templates, making global adjustments and distributing targets are all big time bandits that can require budget process owners to start the planning process months before the budget cycle really starts. It also means that, right from the start, highly trained IT finance professionals are forced to spend their time on project management and data collection tasks instead of higher value analysis to gain insights and make recommendations.

2. Delivering budget variance and documenting plan decisions at the cost center level.

Successful planning hinges on the ability to analyse how changes play out in different scenarios. That’s incredibly hard to do when manually managing multiple versions of multiple plans from multiple cost centers using nothing but spreadsheets, email attachments and expensive bridge reports. Problems arise when plan versions can’t be managed, or changes can’t be viewed, which expose businesses to significant margins for error.

3. Developing the plan overview and rationale for management to review.

The primary objective of the IT financial plan is to translate corporate budget line items into meaningful enumerations of intended spend. When that spend is presented as a single line-item marked with a broad term like “software,” it masks the granularity IT needs to make important decisions. By knowing which software the line-item refers to and when contracts might be running out, it's much more possible to gauge where saving can be made. There are tangible costs associated with a limited view of the IT budget.

4. Translating and mapping general ledger actuals to IT budgets.

Considering how long it takes to build and manage plans, most IT finance teams struggle to translate actual spend from the general ledger and analyse specific plan variances. There’s often no bandwidth to do this monthly, but without this critical analysis to guide them budget owners are taking stabs in the dark. Without a thorough understanding of the underlying budget drivers, plan adjustments feel arbitrary – because they often are. This is the very heart of the misalignment between IT operations, corporate financial realities and business expectations.

5. Chasing down plan updates via emails and templates with limited visibility on what’s missing.

When relying on email threads and embedded comments in disparate spreadsheets to communicate guidance and rationales, it isn’t just hard to track – it’s almost impossible to enforce accountability. That produces a lack of clarity into actual and intended spend from different budget owners. Without transparency, it’s impossible to quickly adjust IT financial plans to align with changing business priorities.

But there’s a better way

Working from a centralised plan, where template creation and consolidation, decision documentation, version management and variance reporting are automated, IT decision makers and budget holders can move seamlessly through the planning process. That means knowledge workers can eliminate manual, mundane tasks. With the time saved, they can focus on analysing and recommending IT financial planning options to align technology investments with changing business strategies.

As an example, Microsoft needed a way to automate the consolidation of 15 cost center budgets within one team into a single plan with ongoing forecasting capabilities. By leveraging IT planning best practices, this Microsoft IT team anticipates it will be able to complete its yearly planning and quarterly forecasting processes in a 50 per cent shorter timeframe with improved accuracy.

A dedicated system of record doesn’t just streamline the IT financial process, it allows everyone to collaborate around a central source of truth, making the whole process more accurate and predictable. It provides greater transparency, eliminates finger pointing and makes budget owners more accountable by creating greater awareness of the financial implications of their budget decisions – which saves everyone time.

Colin Rowland, Vice President, EMEA, Apptio

Image Credit: Shutterstock/Garry L

Colin Rowland
Colin Rowland has built Apptio’s EMEA business from the ground up, establishing a large customers base and growing the team.