As an accounting and finance person, I love numbers, spreadsheets, and financial forecasts—things that leave most people yawning at their desks or running for the hills. But if you’re standing up a drone program at work, you need to know a few things about budgeting and how to work with your finance department.
If you work at a Fortune 500 company or other major enterprise, knowing how much a drone program will cost, and how those costs are accounted for, is essential. Even if you have a realistic number in mind—say $70,000—you’ll need to be able to show your finance department the breakdown of those costs. Most importantly, you’ll need to provide a rationale for your budget request.
In this article, I answer some FAQs on budgeting and working with your finance department. We covered all of this in depth in our recent webinar, How to Plan and Budget for Your Drone Program. You can click here to watch a recording of the webinar and download the slides.
What Do I Need to Start a Drone Program?
If drones are new to your company, it can be difficult to anticipate everything you’ll need at the outset. Initial expenses can include, but may not be limited to, at least one drone, sensors to gather the data you’ll need (such as LiDAR), 8-12 batteries per drone, pilot training, pilot salary (if hiring someone new), data-processing software, and an airspace and ops management platform (no surprise, I recommend Skyward).
Takeaway: Start with your goals and work backward. If you simply want to collect aerial footage for marketing videos, you won’t need a high-end drone or sensors. But if you want to use a drone for HVAC and structural inspections, you’ll need sophisticated sensors and a drone that can accommodate them.
When Should I Ask for Money?
Talk to your finance team to find out what their budgeting calendar is. Companies that operate on a calendar year basis often begin the budgeting process in July with the goal of finalizing budgets for the following year in November. Early fall is a great time of year to talk to your finance department about your capital needs. Often there are leftover capital budget dollars that need to be used by the end of the year, or they’ll go away.
Keep in mind that every company has a different budget planning process for the following year. So if your company starts planning in July, you don’t want to ask for money on December 1.
Takeaway: Most companies have a process for budgeting. Find out what that is, including deadlines for new budget items. Following existing processes is a great way to build a solid relationship with your company’s finance team.
Where Does the Money Come From?
Every company budgets differently, but large organizations tend to divide annual budgets by department. The cost of a pilot might come from one department, but the cost of equipment could come from another department. If multiple departments expect to see a strong benefit from aerial services, the costs could be split. But regardless of “whose” budget the money comes from or how it’s divided, all of it counts toward the overall costs of the drone program.
Here are a few terms you might hear from your finance colleagues:
CAPEX: This stands for capital expenditure. It’s the money a company uses for buying, maintaining, and upgrading assets like a building or equipment. At many companies, new drones would fall under this category.
OPEX: This stands for operating expenditure. It’s the money your company uses to stay in business and typically covers rent, office supplies, and salaries. At many companies, drone batteries and a Skyward subscription would fall under this category.
Payback Period: This is the amount of time (usually in years) that it takes for an investment to break even. Say your company spends $100,000 to invest in a drone program. In year 1, drones are able to save the company $20,000 in pre-existing costs. In year 2, drones not only save the company $20,000, they also create $60,000 in new revenue. The payback period would be two years.
Budget: This is a generic term, and many companies use a unique name to refer to it. No matter what it’s called, a budget is a financial plan for the year, and it doesn’t change. A budget goes through many layers of executive approval before it goes into effect. Budgets include both costs and expected revenue.
Forecast: As with “budget” many companies have their own term for a forecast. A forecast is updated monthly or quarterly so a company knows how it will end the year. Forecasts also include costs and revenue.
Takeaway: Ask your accounting department how to submit a budget request. If it’s a spreadsheet, ask what columns and information should be included. This will make it easier for them to understand at the outset.
How Should I Make the Case for a Drone Program?
If you’re asking your company to invest in new technology, staff, and software, they’ll want to know why. “Our competitors are using drones” or “Maintaining technological parity” may seem like compelling reasons, but they really aren’t. Instead, focus on the benefits drones will bring to the company, especially ones that can be easily tracked and quantified. Your goal is to show that the drone program will pay for itself, and then some. Don’t be afraid to think outside the box—but you may have to do some digging.
The most important information to include is:
- The projected return on investment
- Existing costs that drones can lower or eliminate
- How drones can increase efficiency
For example, what is your company’s current accident record? Could drones help to prevent injury? If so, your company could see a reduction in worker’s compensation rates.
If it currently takes a week to survey a stockpile or a tract of land, could a drone do it in a day? Significant time savings nearly always amounts to cost savings.
If structural inspections typically require cranes or scaffolding, drones may be able to inspect these areas faster and more accurately, using less heavy equipment.
Takeaway: Include a rationale at the bottom of your budget request. Include specific ways that your drone program will make money and save money.
We went over these questions and much more in How to Plan and Budget for Your Drone Program. Check it out!