Foris LLC is a small business just like many of our customers. We probably do our accounting the same way (cash basis) and use the same marketing strategies to gain new customers. But one thing we do differently that saves us a lot of lost sleep is budget.
Now I was not always this good at managing funds in my previous companies. Before I understood how budgeting worked and why it was important I would just run my business based upon income and expenses as they came up. Much like living paycheck to paycheck. And when a large expense came up I would cringe at the expense and try to channel my inner cheapskate and find whatever I needed as cheap or free as possible.
But this type of business management is painful and does not work and hiders growth, which is the lifeblood of a company as we are either growing or dying.
What is a budget?
That changed when I went to work in the enterprise space and worked with government and education at a very large telecommunications company you all know. I learned that a budget is just an estimate of income and expenditure for a set period of time.
Meaning that I estimated what revenue would be for say the 1st quarter of 2021 and then looked at my bills and estimated what those would be, saw what was left and applied a portion of that to other areas of the company. Like marketing, sales, IT, major equipment purchases, upgrades to existing machinery, dividend payments to investors/owners, etc.
Once I realized I was looking at what we thought would happen for that period of time and how we were going to budget each area of expenses it became simple to look at the whole pie and decide where focus needed to be and then apply funds to that budget. (sometimes by reducing budgets in other areas.)
How does this apply to IT?
When it comes to IT expenses too many people do not budget at all.
But as fast as technology advances in the IT space it actually hinders your company to let it get behind by more than a couple of years. And in some areas even that is too long.
Dr John Doe has a practice he has had for 10 years, when he started his practice he purchased new PCs and a switch/wifi device and got internet from the local ISP. He upgraded the OS on the PCs because he was told to by HHS to stay HIPAA compliant. But kept the same hardware, switch/wifi device. He has a guy who does IT he can call if things break and uses a cloud only cheap backup service from a company that his IT guy said to use. He has a computer fail but cannot quickly get it fixed and get the data back up in place. The costs to get this computer fixed is expensive.
Dr John keeps having issues and his costs to keep his PCs working and practice moving are increasing. He does not understand why.
He hires a new IT company out of frustration with the IT guy not being responsive, the new company comes in and starts cleaning up the mess, but the upgrades are causing some disruption and are expensive.
Do Doe wonders why? He never experienced this before when they did nothing to the equipment?
His staff never gets training in IT, so all they can do is complain that the “computers are down”, or “network is broken again.” So they call the IT company to come fix things over and over feeling like nothing is getting done.
Then his bill comes in and he is floored at the cost? Why?
Don’t be Dr Doe.
This is an all too common issue with small businesses that do not budget, and do not take IT seriously. Yes you know your business operates on PCs, scheduling, banking, credit card processing, and more all run on you computer. Lose the computer and lose more than just data, you lose time your employees are screwing around trying to get the PCs to work, or having to call and or open tickets to get the computers fixed, etc. The costs are more than just the hardware and software. Downtime, lost business, possible compliance violations, all are on the line.
So then why would you treat one of the most important parts of your business like it is the least?
How to solve the dilemma.
Plan for 3-5 year hardware refreshes.
That is right 3-5 years you should be working with your accountant and depreciating your IT purchases over 3-5 years for PC and servers, and 5 years for firewalls, wifi, switches, routers, etc.(These need to be managed as well as they can cause policy violations, network performance issues, etc. if left without firmware upgrades.
And by budgeting and planning for the refresh the expense will not be such a surprise, the timing for the upgrades will be known well ahead of time, and you will be prepared. Plus you get the depreciation off your taxes. A win win win….
Your PCs will be newer, faster, with less junk on them. Your employees performance will not be decided by a 12 year old PC on its last leg so they will be able to get more done.
That alone will reduce your employee costs. You will always be ahead of the IT equipment lifecycle curve and will have manufacturer’s warranty.
And most of all you will be able to keep your sanity during the holidays because you will not get a massive bill just to keep the IT equipment running so you can do business.
What’s in it for the IT company?
Yes there are benefits for all in this scenario.
Your IT company will have your name on the top of the good customer list not on the bottom of the naughty list so you will see better service and lower maintenance costs. And maybe a gift at the holiday time? Why? Because their job is easier, they are more profitable, you do not eat up all their time, and you are willing to do upgrades and updates as needed. So they are busy doing the IT work they like and not the IT work they do not like.
And I know at Foris we are more than happy to help our customers look at their current spend, age of equipment, and IT budgeting at no cost to them.
Then get to work…..and we will be right there to support you and keep your IT systems running so you and your employees can focus on what you do best.