An IT manager's budget controls what he or she and his or her team are going to be able to accomplish this year. No, creating a budget may not be the most enjoyable thing that you'll be called on to do, but it just might be the most important. The challenge that a lot of IT managers have when it comes to creating a good budget is that it requires them to master a number of terms and concepts that they may have never encountered in school.
What you'll find inside:
Why IT managers need to care about financial statements
An IT manager's new best friend: the company balance sheet
ROI: what it is and why IT managers need to know how to use it
Three financial terms that IT managers need to know
The good news is that you are not the first IT manager to create a budget. There is a great deal to learn from the tips that other managers can provide you with. A good guide for how you should create your budget may be provided by your company's financial statements.
In order to understand the company's financial situation, you'll need to master the company's balance sheet. Additionally, you'll have to understand the company's assets and its liabilities. How the company runs its day-to-day operations is closely tied to its use of working capital, and so you'll need to have an understanding of this also.
The company will be funding new IT projects using financial leverage, and so you need to understand how this financial tool works. The status of the company is closely watched by outsiders, and in order to keep your team informed, you are going to have to learn how to read an income statement and a cash flow statement.
Your company will be making an investment in your IT team, and they expect it to return a profit. This means that you need to understand terms like ROI, net present value, and internal rate of return in order to understand how your performance is going to be measured.
©2015 Jim Anderson (P)2015 Jim Anderson