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