CIO are pretty good at budget management as it plays to their strong suit of logic and analysis. However, every organisation has its own quirks when it comes to accounting and you need to familiarise yourself thoroughly with their practices to avoid nasty surprises.

"I've seen the situation where someone has had to hold onto the coat tails of the FD and the CIO", says Campbell McLundie of Scott-Moncrieff. The reason was an IT project that was delivered within budget - but ahead of schedule, so cash wasn't allocated to it. Instead of plaudits, the CIO got a kicking from the FD.

Check these 10 tips from our panel and avoid budgeting gaffes.

Make wise purchases
Sound budget management is not unlike good housekeeping. You need to review your purchases and assets regularly to see that you get value for money and do not duplicate and waste money. Spotting what will be important for the business and prioritising these purchases is important. If consumers or clients are buying over the internet, for example, are equipping staff with mobile technology may be the imperative in order to cope with this new business model.

Watch the salary budget
Salary is typically the biggest item on any IT department's budget, accounting for between 50-60 per cent of the total pot. Canny recruitment can yield a huge cost saving. Three years ago, Turning Point charity took the decision to grow its own staff in-house, rather than go out and recruit experienced staff when the need arose. Today two of the original crop have remained and have been promoted, and this talent has been acquired much more cheaply than going to market. Plus, they are highly motivated individuals.

Measure ROI
Nothing's cheap if it doesn't offer the business long term benefit but measuring return on investment is something most businesses are bad at. Making a clear case for all investments, rather than spending your pot as you see fit, clearly builds a confident and transparent relationship with the board. Introducing video conferencing, based on the premise that by 2012 you can cut travel costs by 30 per cent offers clear, measured value, for example.

Who holds budget?
Some unexpected costs can come at you out of left field because IT is so often rolled out on a project basis and costs allocated on a piecemeal fashion. You may come in for a nasty surprise and find costs have been lumped onto your bill, simply because they have a strong IT component. The sort of thing that may get palmed off on IT is the training bill when a new system installed. The risk is greatest when the project's label includes the word 'change': even though the project benefits the whole organisation, often IT finds itself picking up the tab.

Manage stakeholders

This way you can not only circumvent nasty surprises, but also check on how the business is planning to deliver the benefits. Decent ROI on IT - that at least matches the business plan - is essential in order to secure budget in the future. But it's a tough one because ROI lies outside the direct control of the CIO. Stories abound of divisions failing to efficiently use new IT systems because of fears it could diminish a fiefdom or cut headcount. Make sure you invite the owner of the business to project meetings, agree objectives on ROI that are accountable and known at the board. And follow up.

Charging model central
The old-fashioned way is for the IT department to be a centralised cost base and to pick up all IT-related charges. It's not a particularly efficient approach because there's no incentive for the business to use IT in a smart way, but at least costs are transparent. A step forward is to divvy up the IT costs between the number of user units – a bit like splitting the bill at a meal. Of course this leads to instances of unfairness, such as when one person eats chateaubriand and her neighbour makes do with bread and soup. But it does at least introduce the notion of chargeback and internal customers.

The ABC method
Forward-thinking organisations lean towards a more precise way of allocating charges to internal customers called activity-based costing. This entails a lot of leg work to examine the outcomes of the business and the IT activities involved in creating them. It's incumbent upon the CIO to really understand the drivers of the IT costs and to measure and log these activities. This has the advantage of pushing ownership out to the business but the downside is that if costs are difficult to understand or unfair, users will not buy in and start to shop for their IT elsewhere.

Capex and Opex
Capital expenditure - as opposed to operating expenditure - can be a source of consternation to the CIO, particularly if he is a newcomer. Capex is standard accounting practice that spread costs over the useful economic life of an asset. So, instead of taking the £10m hit for a new SAP system immediately and in one go, it may be charged at £2m a year over a five year period. The problem with Capex is that half of the CIO's budget may already be accounted for by his predecessor's spending. Operating expenditure accounts for the money as it is spent. Effectively it gives the CIO a clean sheet each year but it also makes expenditure and ROI much more transparent.

Avoid Capex anguish
CIOs should familiarise themselves with the company's Capex policy straight way to avoid blushes in the boardroom. You may agree to a 20 per cent cut in your IT budget, for example, only to discover that you have no cash left because the remainder of your budget has already been spent writing off earlier IT investments. Have a chat with the FD to find out what your spending money for the year is. If you find yourself with a heavy Capex burden, it might be worth holding amnesty negotiations with the CEO and FD, especially if the money is writing off systems that have already been replaced (not so unusual!).

Common pitfall
A common mistake is to underestimate the costs and oversell the benefit when making a business case for IT. If you do the former, then you risk blowing the budget. A smart way to do this is to built in plenty of contingency on the resource side and be cautious when estimating the benefits. Make sure they are significant but be conservative. This way, when you over-deliver consistently the board will be delighted. Crucially, it makes getting funds for the next project easier.

The expert panel:

Ibukun Adebayo, CIO Turning Point
Campbell McLundie, consulting partner, Scott-Moncrieff
Sheila Bryant: CFO and company secretary, Leading Resolutions