Financial Management for IT Services (otherwise known as ITSM) is an aspect of the service delivery section of the Information Technology Infrastructure Library (ITIL) best practice framework. Its goal is to ensure that IT Services are cost effective and within the limitations of both the budget and the agreed amounts within the Service Level Agreement (SLA). It is constructed in such a manner as to plan for and control expenses, and recovers them whenever necessary.
The Financial Management team is in charge of three primary sub-processes:
Budgeting
The budget is the organization’s plan for future expenditures in IT services. By having a predetermined budget, the risk of over-spending is dramatically reduced, which in turn guarantees that the incoming revenues, unless lower than expected, will be enough to cover the cost. It also allows organizations an opportunity to compare the actual costs with the forecasted costs, which can be used to improve the accuracy of future budgeting calculations.
IT Accounting
This is the aspect of financial management which is focused on the flow of money within IT Services. By monitoring the various debits and credits which are accrued, the financial management team can pinpoint areas that are unnecessarily costly, and make suggestions as to how the cost-efficiency of these areas could be improved. It also allows a window of financial transparency, which can be useful in instances where management must make budgeting decisions.
Charging
Charging is the ability of the financial management team to assign the costs of an IT service in a proportionate manner to its recipients. It is often a step in the direction towards a company’s IT division operating as its own entity. An added benefit to it is that transparency in terms of which services are being billed for can encourage users to behave in a more cost-friendly manner. If the business receives a sizable printing charge, for instance, they might encourage their employees to only print documents that are absolutely necessary.
Due to its innate complexity, charging requires a significant investment in terms of resources, and must be handled with care in order to avoid unwanted anomalies, such as a given department spending frivolously when the entire company is going to have to pick up the cost. The policy for charging needs to be simple, realistic, and fair to everybody.
Charging does not necessarily mean that money must be transferred from one entity to another (known as Full Charging). It can be presented as a disclosure of information regarding the cost of IT Services (referred to as No Charging), or it can give a picture of what the provided services would have cost if Full Charging were being instituted (Notional Charging).
Through the processes of budgeting, accounting, and charging, the financial management team safeguards the financial viability of the continued operation of the IT system. By planning for the future and tracking all current transactions, they give an organization a detailed picture of their current monetary situation, allowing for decisions to be made with clarity and the knowledge that they are grounded in sound financial evidence.
