Intelligent IT Budgeting: Does Cost-Cutting Hurt More Than It Helps?

When it comes to IT, most firms operate under the motto, “Do more with less.” It makes sense.  In a business environment in which even minor tweaks to daily processes can boost your bottom line, it’s only logical to try to offset rising yearly costs by carefully evaluating big-ticket categories like IT.

But could an attitude of cost-cutting cost your business more in the long run?

As it turns out, the cost of IT isn’t just a list of monthly and yearly expenses. It’s also the opportunity cost of using technology to run a more efficient and seamless business. If you focus too much on the bottom line – and not on how your IT investments influence how much work your firm can produce – you end up missing out on an enormous potential return on investment (ROI).

While there’s no tried-and-true checklist for cutting IT costs, here are three general principles you can apply to your firm to make sure you’re getting the most out of your IT budget.

  1. Spend more on IT when it allows you to spend less elsewhere

    If you approach your IT budget with a cost-cutting mentality, you might find you lose out on efficiencies and opportunities for ROI in the long run. Consider many firm’s journey to a paperless work space: it can be costly to transfer your documents to a secure server, but once you get through the initial transfer, all documents are immediately available. This cuts out the inefficiencies of asking managing partners to sort through papers in the filing room when answering clients questions -- a 10- to 15- minute interruption that compounds over the course of a single day, or week. 

    “Instead of trying to slice the IT budget, I try to find ways to use technology to cut costs in other areas of the firm,” says Wesley Hartman, IT Manager for the California-based accoutning firm Kirsch, Kohn, & Bridge, LLP . “When we spend a little more on IT in one area, we save more than we spend somewhere else. In fact, with different efficiencies we’ve implemented over the years, we’ve been able to increase the number of clients we serve while keeping the same staff size.”

    For example, implementing an eSignature program might add a new IT cost, he says, but it removes a significant amount of stationary and postage cost, not to mention time saved from mailing a document to a client and waiting to get the signed document back.

    “The same principal applies to using secure cloud-based services with a monthly fee instead of paying out of pocket to keep physical systems up-to-date,” Hartman says.

  2. Invest for the long-term, not the short-term

    In trying to be frugal up-front, many accounting firms end up spending more money in the long-run – sometimes up to 50 percent more, Hartman estimates. Instead of focusing on how to save costs in the short-term, it’s more beneficial to spend in the right places and at the right time, so your IT investment can save you money over the course of a five- or 10-year period.

    “If you try to go too cheap with your IT products, you end up getting what you pay for and will have to replace items sooner than you’d need to,” notes Hartman. “For example, we make a point to avoid buying bottom-of-the-barrel computer products because we know a cheap laptop will last two years and require us to replace it too soon. Instead, we buy mid- or upper-range products and get an extra five to eight years out of them. The ROI – including the lost time from laptops dying and researching a replacement – saves us more money in the long run.”

  3. Buy IT hardware directly from manufacturers

    Instead of cutting costs by buying lower quality products, try to cut costs by buying from different providers. For example, even if your accounting firm takes advantage of business discounts from big box stores or online retailers, you’re more likely to get a good deal if you buy hardware like computers, laptops, monitors and keyboards direct from manufacturers. 

    “In the accounting industry, it can be common to work with a third-party IT company,” says Hartman. “But even when our third-party partner offers steep discounts, I find I can often save up to 20 percent or 30 percent by working directly with the manufacturer. It’s not necessarily the partner’s markup; it’s that a manufacturer has more flexibility to offer a better price.”

    The most powerful way to manage an accounting firm’s IT budget is to think of expenses as ways to invest in your firm’s productivity. Stay forward-thinking about how technology can change the way you work, and you’ll find it’s not just the faster computer or new software that delivers great efficiencies, but how your team uses that computer or new software.