Financial Data
Updated 26 Feb 2020


Technology and your budget

It is hard to keep up with the rapid pace of technological change – and even harder to finance it. But you have to if you want to maintain your competitive edge.


14 April 2010  Share  0 comments  Print


All the answers to your unique business lifestage questions

IT projects are notorious for running over budget, but usually because initial plans focus on containing costs, rather than meeting needs. Make your IT budget part of your strategic plan, and keep the following tips in mind:

Hardware: Create a list of your current hardware and peripherals (such as printers), including brand, type, processor speed, memory, drives, connectivity, etc. This will help you to prioritise hardware upgrades.

When starting from scratch, bear in mind that creating a network with high-performance equipment at its heart is often more cost-effective than building individual workstations for every employee.

Software: Create a list of all the applications used by each employee for every aspect of their work.

If there is overlap, consider investing in one system that can meet multiple needs. Also think about buying extra user licenses for future additions to your staff complement.

Data conversion: If you need to export data from an old system to a new one, make sure you allow for conversion costs.

Charges depend on the format and amount of your data, and your technology supplier should be able to recommend the most cost-effective approach.

Maintenance and support: For mid-range systems such as work flow or accounting packages, annual maintenance costs can be as much as 15% to 30% of the initial software price.

Check if software upgrades are included with your maintenance contract. Also ask about telephone, email and web-based support, as this tends to be the most affordable.

Training: Your investment should include your employees, as upgrading your people ensures optimal use of the technology.

Consider what sort of training you and your team would prefer. If you can leave the office for a few days, intensive hands-on classes might be the most helpful.

Work in degrees: You don't have to upgrade everything at the same time. Rather than purchasing new computers all at once, budget an annual amount for each workstation and upgrade a portion of your machines each year.

Alternatively, sign a big cheque:  Sometimes spending more means spending less in the long run. An upgrade that costs slightly more might keep you going for longer before the next upgrade is due.

Consider sharing: If you share office space with other small businesses, look into sharing network infrastructure and support staff. Even basic technologies like phone lines that are routed through a single reception point could trim costs when split across a group.

Buy in bulk: Form a buying consortium and negotiate discounts with suppliers based on bulk orders. It could save you thousands on the cost of your consumables (such as toner, ink cartridges and paper).

Negotiate upfront costs with care

Agreeing to a budget with a supplier can be a lengthy process. Speed it up by specifying every aspect of the project in as much detail as possible. This will also help to control costs and identify potential problems.

Suppliers of IT systems or services normally expect payment upon delivery of the system. However, it is worthwhile trying to extend the payment period until the installation is complete and you have tested it in your own time.

Learn the lifecycle costs

Saving money on the purchase price could mean that you end up with equipment that is more expensive in the long term. Use the following list to calculate your total budget:

Initial costs

  • Consultancy
  • Hardware (plus extra infrastructure like cabling or electrical supply)
  • Software licence fees
  • Software configuration/customisation
  • Installation and training
  • Compliance with health and safety laws

Ongoing costs

  • Licence renewals, upgrades and training
  • Hardware upgrades
  • Expansion of memory, disk size, communications capacity
  • Support (telephone, email, online, on-site)
  • Maintenance and replacements
  • Consumables (eg, printer cartridges)
  • Communication charges (telephone costs, Internet access, subscription charges)

Information from www.blackbaud.com

It needn't leave you broke

If you can't afford to pay for technology upfront, and if your supplier does not offer flexible payment terms, you still have the option of financing equipment through your bank. Standard Bank recommends the following three options:

  • Business revolving credit (a loan where repayments are made in equal monthly instalments. Once you have paid back 25% of the loan, you can withdraw the funds up to the original limit).
  • A medium-term loan (a loan paid off in monthly instalments over two to seven years, sometimes longer. Interest is linked to the prime rate and determined according to the repayment period, collateral, value of assets and your risk profile).
  • Asset finance (this is specifically for financing assets such as capital equipment and is available on an instalment or lease basis).

For more information contact the Asset Finance Department at Standard Bank on
0860 000 000 or email [email protected].

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