I prefer to look at the budget process as “Business Planning”. I run IT like a business within the business. Budgeting to me implies just the dollar component. Probably the most important component is the business side. Working with business units and functional department heads (the business), evaluate business strategy assumptions made for the current year, adjustments made during the year, and any anticipated adjustments made as we approach the last quarter. Use this as the canvas for re-forecasting the current year.
Next work with the business to formulate a business plan for the next year and 3 to 5 years out. This will be the canvas for next years budget. The further out you go the tougher it is to be precise but macro strategies should be considered – acquisitions, divestitures, going public, anticipated economic outlook, etc.
Now align the IT budget with these things in mind. Start with a re-forecast of the current year. Some significant costs may just not happen. Maybe they were re-prioritized, cancelled, ambitious, etc. You also may have additional projects pop-up that weren’t anticipated – new acquisition, new company direction, etc. Adjust as needed so cash flow needs can be anticipated.
There are many factors to consider for the coming year – staffing, contracts (new and expiring), equipment needs, variable consumption of resources, etc. This would go from a blog to a book if I go on. Just remember, don’t just budget…Business Plan.