Budget Management
The Budget Management (BGM) capability is the ability to oversee and adjust the IT budget to ensure that it is spent effectively.
Structure
BGM is made up of the following Categories and CBBs. Maturity and Planning are described at both the CC and the CBB level.
- APlanning
- A1Budget Scope
Manage the scope and depth of information relating to the categories of expenditure in the IT budget (for example, capital expenses, operations expenses, shadow IT, and so on).
- A2Budget Processes
Develop processes to manage budget planning and expenditure (such as processes to manage stakeholder involvement, processes to align the budget planning with business planning cycles, processes to manage payments, and so on).
- A3Business Alignment
Engage stakeholders from the wider business in setting the IT budget to ensure that strategic priorities are reflected in the IT budget priorities.
- BPerformance Management
- B1Budget Monitoring
Monitor and report to stakeholders on actual performance against planned expenditure.
- B2Variance Management
Manage deviations of expenditure from the planned budget (by, for example, establishing escalation channels, and taking corrective actions).
- B3Predictability
Manage IT expenditure within budget targets and variance ranges.
- CGovernance
- C1Budget Governance
Establish oversight structures and decision rights to set IT budgets and manage allocations.
- C2Accountability Assignment
Establish accountability for managing the expenditure of IT budgets.
Overview
Goal & Objectives
An effective Budget Management (BGM) capability aims to:
- Make budget allocation decisions in a deliberative, participatory, and transparent manner.
- Achieve predictable IT financial performance by establishing responsible fiscal management and clear lines of accountability.
- Maintain the flexibility to respond to short-term challenges and opportunities by allowing managers to reallocate IT funds across budget categories and projects at their discretion.
- Make sure that expenditure matches the allocated budget. Identify and plan for any likely overrun in advance.
Scope
Definition
The Budget Management (BGM) capability is the ability to oversee and adjust the IT budget to ensure that it is spent effectively.
Improvement Planning
Practices-Outcomes-Metrics (POM)
Representative POMs are described for BGM at each level of maturity.
- 2Basic
- Practice
- Explicitly define the approach for relevant stakeholders to participate in planning the IT budget.
- Outcome
- Participatory planning of the IT budget is likely to lead to higher levels of support for it.
- Metric
- Percentage of identified key stakeholders who are involved in defining IT budget planning approaches.
- Practice
- Prioritize which IT budget items should carry the highest levels of expenditure monitoring.
- Outcome
- Expenditure monitoring allows greater levels of visibility, planning, and predictability.
- Metric
- Extent to which actual expenditure matches budgeted expenditure.
- Practice
- Establish formal IT budget oversight structures with the support of the corporate finance function.
- Outcome
- Budget oversight benefits from corporate finance's expertise.
- Metric
- Percentage of IT expenditure approved using IT budget oversight structures.
- 3Intermediate
- Practice
- Designate managers accountable for forecasting and managing actual expenditure.
- Outcome
- By assigning accountability, there is greater likelihood that budgets will be effectively managed.
- Metric
- Percentage of IT budget and associated expenditure assigned to designated managers.
- Practice
- Ensure budget allocations across IT projects are fully aligned with the IT strategy.
- Outcome
- Confidence increases that the IT budget supports the implementation of the IT strategy.
- Metric
- Percentage of projects funded that are aligned with the IT strategy.
- Practice
- Review deviations of expenditure from the IT budget, and take corrective action as required.
- Outcome
- Run rates for IT expenditure are more reliably predicted, and budget targets are increasingly met.
- Metrics
- Percentage of IT budget targets that are met.
- Percentage of IT budget variances satisfactorily resolved.
- Practice
- Ensure that the potential impact of proposed IT budget expenditure is taken into account in the budget for future years.
- Outcome
- The knock-on demands of the current IT budget commitments can be better predicted to increase future budget flexibility.
- Metric
- Budget split between predetermined (often longer-term) versus discretionary budget expenditure.
- 4Advanced
- Practice
- Expand IT budgeting to include all of ‘shadow IT’ expenditure.
- Outcome
- Total IT expenditure across the organization is clarified, enabling identification of more synergies and variances.
- Metric
- Percentage of total IT expenditure accounted for by the IT function.
- Practice
- Involve all relevant stakeholders in IT budgeting and ensure that the budgeting process is aligned with business planning cycles.
- Outcome
- There is increasing stakeholder participation in recognizing and resolving budget variances.
- Metrics
- Percentage of identified relevant stakeholders participating in IT budget planning and management.
- Number of unresolved budget variances.
- Practice
- Broaden the governance structures to authorize appropriate individuals to facilitate budget reallocation.
- Outcome
- Flexible governance structures facilitate appropriate responses to unanticipated events.
- Metrics
- Number of IT budget changes per quarter.
- Number of budget reassignments.
- Practice
- Automatically escalate expenditure that deviates from the IT budget plan.
- Outcome
- Key stakeholders are immediately informed of variances to encourage a timely response.
- Metric
- Number of unresolved budget variances.
- 5Optimized
- Practice
- Advocate and identify budget management improvement opportunities across the organization.
- Outcome
- The IT budget is predictable, inclusive, and continually improved.
- Metric
- Planned budget versus actual expenditure.
- Practice
- Ensure that the IT budget continues to be actively managed for flexibility, so that the organization can capitalize on opportunities to invest in innovation.
- Outcome
- Budget management is seen to enable innovation.
- Metric
- Percentage of IT expenditure invested in innovation.
Reference
History
This capability was introduced in Revision 18.10 as an update to Budget Management (16).