ITSM: Financial Management
ITIL is one of the most popular tools from the ITSM framework used abundantly across multiple industrial sectors. One of the main aspects of ITIL is ITIL Financial Management which is also known as Financial Management of IT services. Apart from taking care of all the costs and accounting related to IT services, the financial management of IT also takes care of service portfolio management, demand management, business relationship management and strategy management for IT services.
The main goal of looking into the finances of IT service management is to continuously establish best practices and ensure continuous improvement of all the processes. The management of IT services doesn't stop at ensuring high quality of service. It also involves ensuring best practices which continuously improves efficiency and improves the finances of the overall organization. Financial management is necessary for IT today primarily due to the growing complexities of the technology and the services offered.
What is Financial Management of IT Services?
The main idea is to take into account all the costs involved in defining the value of services offered to clients. This involves various aspects such as accounting, budgeting, charging, overheads and others. The goal is to recover as much expense as possible and generate a profit for the IT services. Some of the various steps involved in the implementation of financial management in IT are-
- Making a detailed inventory of all the software, hardware and other assets.
- Making a priority list of all the assets based on their requirement by the organization.
- Improving efficiency of all processes.
- Initiatives to lower cost of service.
The ABCs of Financial Management
The of financial management of IT services has three main parts- accounting, budgeting and charging. Accounting determines the cost of providing the service to various clients. The main goal of accounting is to improve the efficiency of the IT department. A cost-benefit analysis is usually carried out along with the classification of various services. Budgeting strikes to achieve a balance between paying for all the overheads and infrastructure along with managing funds for newer operations and growth. It involves capital expenditures, operational budgets and a plan for strategic spending. Charging is the process of determining how much to charge the customer for the services provided. For ITSM teams that are a part of the company, the charge is absorbed as the final overhead of the organization. A charge model with a proper break up is usually designed for the IT team.
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