How to Budget for New Software This Financial Year
Could your business benefit from new software? Great! We explain how to budget for your new IT project.
How many times have you sat down at your desk to do the same task over and over again, thinking – “there must be an easier way”?
How many reminders have set so you don’t forget standard business deadlines?
How many “to-do” checklists do your team members have sitting on their desks?
We won’t go on. Point taken, right?
What if you could install new software and reduce these manual (and infuriating) tasks? Sounds amazing, yes! But, new software comes with a price tag. A price tag that must fit within the business budget.
But how do you budget for new software for a business?
Great question. Budgeting for new software for a business should come down to more than dollars and cents. Sure, cost is a major factor, but the true long term savings to the business must considered. When you are yet to install the system, this can be hard to predict, making the approval process tricky.
A basic outline to budgeting for projects
Firstly, you need to be clear on the projected revenue for the budget year. Is this an accurate forecast? Is there any uncertainty or risk to the number? How about upside – any potential for prices increases or scope changes?
Secondly, you need to understand the day to day operating expenses for the business. This needs to be an accurate portrayal of the fixed costs and those that fluctuate with revenue. Are there any expenses you can reduce (without harming business outcomes)?
Now we know what money you have left to consider capital investment, we can look at the software costs.
If you’ve done your research, you’ll have an idea of costs from software providers. There will be monthly charges to include in the budget after implementation. You will also need to consider training and implementation costs from the provider.
After you work these numbers into your cashflow and budget – how does it look? Do you have enough of a safety gap should some of your risks eventuate?
If the answer is yes, great! A new system could be what you need to move your business to the next level.
For those who answered “yes” above, let’s consider future projections. Following implementation, you will see some efficiencies from the new system, reducing overheads. With management no longer distracted by operating tasks, you may experience increased revenue.
Now, this is a very basic approach to budgeting for new software for your business, but has this article got you thinking? Is there is a better way?
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