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Budgeting for Technology Companies

Budgeting is a process that helps you predict your income and expenses during a set period of time. A detailed budgeting process allows you to analyse your whole business into parts and their respective functionality. Technology/software businesses specifically run a risk of cost-overrun in a few areas if not properly researched in detail.

1) Hiring

Your project manager will tell you when and where you need resources for your project. A matrix, however complex, will help you understand your people requirement across multiple projects; sometimes across different geographical locations. Striking a balance between permanent and contractual employees needed for certain functions across the organisation is critical. Investing in human resource improvement programs can also help increase productivity. Knee-jerk decisions when hiring for any position, however vital, can result in an un-forecasted cost that could be high in value.

2) New Product Features

Once a product is ready or a software is launched, please ensure you have a build-up program. This program highlights the next few phases of your product features launch. You must be clear what features will launch in phase two of your project and subsequent projects. Budgeting for them accordingly is important from the point of view of resource and marketing costs.

3) Legal Expenses

Legal expenses are a real threat if not incorporated into the budget at the beginning of the year for any company who is working towards creating a product or service that is going to be sold across various geographical locations. Where your office is located as a legal entity vs where your products/services will be sold, has a larger bearing on the money spent on getting the right paperwork and legal permissions sorted. To pre-empt expansion across certain areas during the fiscal year will help you predict what legalities the process might entail.

4) Sales & Marketing

It’s tough to allocate a cost for sales and marketing without having any prior sales experience in the same geography or business environment, but one can still learn from past experiences. We can try to budget with what we are willing to spend to promote the brand, product or service. It is also important to determine which company is at what cycle of growth and, as the company grows, it becomes imperative to allocate a budget for marketing.

5) Infrastructure

Most technology companies are gung-ho on starting out with a bang and, hence, land-up spending tremendous amounts of money to attract new clients and ensure the employees are happy and satisfied. It is good to have a swanky office, great machines to code on, and a trendy interior to offer a great working environment to the employees. However, this has to be done with a balance in mind. Small and medium businesses have to consider who their clientele is and whether a heavy investment in infrastructure is warranted for and justified.