It’s the new year and tax time is here. Which makes it the perfect time to review your accounts. Where did your money go?
One expense that I find is continuing to take more money than expected is technology. It’s forever obsolete. I spoke to my accountant about it and his advise was to sit down and figure out the real cost. Look at ten years. Over the course of ten years how much do you think you will spend on technology? Divide that by 10 and that’s how much your should budget each year.
What do you include?
The obvious are:
- Computer. Figure that you need a new computer every 5 years. I replaced my last computer at 7 years and it was barely keeping up with the new software demands. For your budget figure buying two computers.
- Cell phone
- Hardware peripherals, camera, printer, card reader’s, modem, router, back up hard drives
- Website, website management
The not so obvious are:
- Software,.. Quickbooks, Autocad, Adobe Suite and their updates or licenses.
- Subscriptions, Cloud computing.
- Mobil Data plans. In the last ten years this has gone from optional to a must have…. or has it. Wifi is often available.
- Internet service
- Education to keep up to date. This could be a subscription to lynda.com, webinars, or in person classes.
- Free social media. These are becoming less free and always remember that your time isn’t free. This makes the cost hidden. For a week, record how much time you spend to get a better picture of the time munch.
- Printer ink.
- Insurance or extended warranty’s
- Downtime. The time lost when something is just not working right.
If you want to read more about this and really geek out, check this out http://www.networkalliance.com/your-advantage/understanding-technology-costs. Of course they are trying to sell you IT services. But it’s good information none the less. Things like, the average SMB spends 6.4% of its annual revenue on IT expenses. On average, firms spend $700 per user per month when all IT expenses are factored… Who knew! If you’re a small business like me, you may find that many of your IT services can be taken care of by your babysitter or the kid down the block.
It all adds up. The first step to managing your expenses is having the real data of what they are. Remember, if you have a home office, many of these are shared expenses and therefore deductable. Check with your accountant. Equiped with your real data create your annual budget and stick to it.