Question

1. Please explain some ways that budget assumptions may be off or different then what was projected.

2. Paying for Information Technology is more of an operational or capital expense?

3. When looking to cut FTEs, why is it easier to eliminate open positions or cut overtime, rather than eliminating current full time staff?

Answer 1

3) FTE Analysis:

FTE is nothing but full time equivalent which is the number of hours spent by the full time employees in the organization. This is used by the organization to convert part time into full time members.

It is economical for the company to cut the overtime employees or open positions. The company must strive to eliminate positions for which the cost exceeds the value. The company can start identifying opportunities that can reduce the department’s workload – even cuts that can save one FTE. Then the remaining work can be redistributed among small number of full time employees. The company can also use the full time employees with technology by replacing the overtime & open position employees. It is also expensive for the company to cut on full time employees as they would have spent more on various things like recruitment, training, salary benefits, medical benefits etc.

2) Previously the spending on technology by companies was considered to be operating expenses. Bt now many companies are shifting their approach to operating expense because they can spend only for the capacity needs, speed up the budgeting process, cash flows can become smooth instead of lump cash outlays, the companies can also make multiple investments.

1) There can be differences between assumptions & projected when in some cases costs rise or certain expenses may suddenly become more expensive. In some cases, the company may require fewer resources than what was projected. There can also be some other reasons like change in the goals or requirements of the organization, change in the technology or arrival of some new trends in the market, availability of required manpower or some other resources etc.