Financial Nature: First you need to know whether your organization is capital intensive or expenses driven. A capital-intensive organization has to make large investments in equipment and supplies over the course of a year to run its business, e.g. A hospital. In such an organization, building up assets is looked upon favorably. An expenses-driven firm does not need such high recurring expenses, such as a bank. Their outlook therefore is to limit spending and avoid capital expenditures. An IT firm or department is often of the latter kind.

Cash flow: the net balance of incomes and expenses. This determines whether you may have enough money to finance a project, or require a loan.

Financial metrics: A number of monetary parameters used to determine the health of your organization. One is asset-turnover ration, an indicator of how your purchases of equipment (assets) are impacting the company’s revenues.

Opportunity cost: This is the trade-off between the cost of a new (or ongoing) project, and the potential pay-off of starting (or continuing) it. Almost all projects are a net cost to the organization initially, and they may take months, if not years to start showing profits.

We have put together a more detailed primer in our Budget Toolkit.

But that is not enough. Budgets in recessionary times are a different matter – the money available maybe even less. Secondly, if the IT department is not a core function of the organization, the finance department may be tempted to further cut allocations.

In these cases, a little more creativity can be used to draw up your budget. The Toolkit includes 10 tips on managing your budget for difficult times, of which we’ll leak out one.

Many organizations keep a budget for team meals and entertainment, which go a long way in keeping up employee morale and busting stress. While it is tempting to cut back on this, the savings might not be much, but the psychological cost might become high. So do find creative ways of managing this budget!