The IT Budget worksheet is an Excel or Lotus 1-2-3 spreadsheet that can be used to develop your annual IT operating budget. There are three different worksheet tabs.

• Assumptions - A convenient place to maintain your assumptions for each budget item. A starter set is included to assist your efforts.
• Operating Budget - This worksheet is used to develop your monthly IT revenues and expenses. Two line items are calculated automatically for you and inserted from two of the other worksheets,
• Salary and Consulting Fees.
  • Salary - Used to list all employees and their salaries. The total is automatically plugged into the Salary line item in the Operating Budget spreadsheet.
  • Consulting Fees - List all consulting engagements and associated costs planned for the year. The total line is automatically plugged into the Operating Budget line item for Consulting Fees.
  Make copies of this spreadsheet for other revenue and expense categories for which you need to develop detail backup. Insert the appropriate cell references into the Operating Budget cells to pull in the total expense line.

As you develop your budget, it will help you later if you document the assumptions you use to create each budget line item. Use the tab named Assumptions to list them. Check the tab for examples that should help you get off to a fast start. Save them as help for next year's budget.

1. Begin with the Salary spreadsheet. If you develop a good budget for salaries and related expenses, you have completed 70% of the effort. Open the Salary spreadsheet.
2. List all employees in your department and fill in their monthly salary amounts.
3. Go back to each employee and update the salary month in which you plan to raise the employee's pay. Replicate all monthly fields to the right of the raise month for the increased monthly amount.
4. Add open positions that you plan to hire. Input the monthly salary amount in the month in which you expect to add the employee. Then replicate the amount into months remaining in the year.
5. Add an extra employee new hire or two, depending upon the size of your organisation for unexpected needs. Repeat the actions you followed in Step 4. Check to see that the totals for the Salary spreadsheet have been copied into the Salary line item in the Operating Budget spreadsheet. Do "File Saves" often to protect your information.
6. Open the Consulting Fees spreadsheet and list all planned consulting engagements for the new year. Add the dollar amounts that you expect to spend in the month's cells in which you expect to incur the cost.
7. Add a line item for "Unplanned projects" and add a nominal expense amount periodically through the year to give your budget room for items you can't know about at this time. Check to see that the totals for the Consulting Fees spreadsheet have been copied into the Consulting expense line in the Operating Budget spreadsheet. Do a File Save.
8. Research each line item in the Operating Budget spreadsheet and fill in the monthly amounts. Tips to help you in this process include:
   1. Use a % of salary figure and calculate the Employee Benefit expenses. Accounting or upper management can tell you what percentage to use.
   2. Anticipate peak workload times that require Temporary Labour, if any, and plug the dollars into the appropriate monthly cells.
   3. You can calculate Seminars and Training based on actual events you plan to spend money on. An easier method is to multiply a dollar factor times the number of employees that you have and spread the total cost over the 12 months.
   4. To calculate the Recruiting fees, multiply the annual salaries of newly hired employees you plan for by a percentage you normally see from recruiting companies (typically 15% to 25% of an annual salary). Place the fee in the month you expect to hire the new employee. You should add two to three more recruiting fees throughout the year for fees needed to replace existing employees that leave.
   5. Estimate Relocation fees and include in your budget if you expect a relocation.
   6. You should maintain a Computer Lease and WAN Lease log. Pull the numbers from your log and be sure to anticipate changes in your future needs.
   7. Hardware and Software Maintenance should be listed in a Vendor Contracts list. This tool is included in the IT Manager ToolKit. Anticipate changes, price increases, and look for annual billing items.
   8. With many expenses, you can estimate monthly expenses by reviewing past year's P&L statement trends for your department. Be sure to anticipate special situations that are required to handle new projects and initiatives during the new year.
9. Compare with past year P&L actuals and validate budget line items for reasonableness.
10. Review project plans for the next year to assess whether you have all exception costs planned for.
11. Add additional adjustments as needed to maintain a conservative, yet realistic budget.

Final comments: Your budget must have some amount of buffer in it to allow for issues that will come up, but that you have no way of knowing about as you are developing the budget. I have found the best places to do this are in salary by forecasting new hires a bit earlier than they may be needed, by anticipating a few more recruiting fees, and simply adding items for contingency purposes.

Another important note is to include expenses to motivate your employees. That might include an annual outing, a special event with a motivational speaker, or any number of ideas that you can come up with. Put the money in the budget and you won't have as much of a challenge in getting it approved by your manager.