Financial management of IT services is referred to as financial management in ITIL. It involves strategy creation for the finances of the organization. It includes various processessuchas service portfolio management, business development, demand management and strategy management.
Service oriented organisations should not onlybe concerned about the quality service for customers but also require applying the best practices over all the sections of the organisation. The business model needs to be efficient in management as well as costs.
Maintaining the finances and improving the budgeting techniques is also crucial for enhanced performance of an organization. These are complex functions and creating specialized provisions for these is imperative. Financial management for ITIL is the way out for these management issues.ITIL Foundation Certification course covers all key concepts and processes of the newest ITIL framework to help you become ITIL 4 certified
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Goals and objectives of financial management in ITIL
The main objective of these financial management of IT is acquiring sufficient funds for developing, designing and delivering services. These services are those which coordinate with the strategy of the organization.
Financial management in ITIL allows to define and maintain an identity in providing services. It helps in analysing the cost of providing these services. Moreover, this framework is helpful in managing and communicating these costs. The change in strategies or methods adopted by the service provider has numerous impacts. One of these impacts of new and changed strategies is financial. Evaluation of this impact on finances is also an objective of financial management in IT services.
The provision of services can be maintained only by securing the appropriate funds and financial management supports in it. Each organization incur some expenses and earns income. Keeping a record of these income and expenses and further understanding their relationship is important. This understanding facilitates the creation of balance between income and expenses. This balance must be in coherence with the financial policies of the organization.
The main goal of financial management in ITIL remains that of providing insights and decision making ability to the organisation along with higher operational visibility.
financial management in ITIL
The financial management id classified under 3 categories i.e. ABC
Keeping an eye on the expenses of the organization is a component of financial management. Accounting helps the IT service provider to completely understand the ways its money is being spent. It assists in identifying variety of costs such as by customer, service or activity. The components of accounting include ledger keeping, charts of accounts, accounting systems and journals. This requires specialized skills and must be taken care of by appointing a professional accountant.
Budget is a word that needs no explanation. It is simply the forecast of the income and expenditures of money in any organization. It involves prediction as well as control of these monetary transactions. It depends on the organization to choose the time period of budgeting. Generally it is kept annual and can be changed according to the requirements. A follow through of the long-term budget is also necessary at regular intervals, for instance monthly budgetmonitoring.
Customers are provided with services and billed for it. This function is also taken care of by the financial management of the IT service provider. It necessitates the establishment of working and strong accounting practices.
Functions of financial management in ITIL
There is plentiful work available for the financial management team in the IT services. They are required to function in multiple dimensions and with efficient outcomes. Let us look at them one by one:
This system needs to evaluate that if a service is worth investing or not. It does a pros and cons analysis of the service and decides on its viability. Apart from the new services it also deals with the existing services and determines if it should be continued or not.
The financial services are responsible for shifting and influencing the demand of a specific services. They are burdened with this role and are required to create the desired stimulus about various services that are provided to the customers.
Service portfolio management
An IT service provider deals in numerous services and a proper portfolio of these services is required to be maintained. The cataloguing of the services and their prices is summarized by the financial management of IT services.
Service provisioning optimization
As we saw above one of the main objectives of financial management if ITIL is to acquire the right amount of funds. Alongwith this acquisition, they are required to market and improve the provisioning of the service.
When the accounts are set straight and every service is valued for its efficiency in correct time intervals, it surely enhances the confidence of the organization. It assists in planning and making assessment of the future services to be provided.
Service investment analysis
Financial management is in authority of the cost benefit analysis of each and every service being provided by the IT service provider. It is responsible for making timely recommendation which will help the organisation in making decisions according to the market demand.
Budgeting, accounting and charging
These are the crucial activities of the financial management of ITIL and have been discussed in detail earlier.
Lack of financial viability and coherence can lead to disastrous outcomes for the organisation. Ensuring compliance in all kinds of financial issues is essential function of financial management of IT services. Consistency among the actions of the other departments of the organisation and financial section iscrucial for harmony and growth.
Variable cost dynamics
Analysing the fixed cost and variable cost being incurred is also an activity undertaken by Financial management of ITIL. They need to recommend the ways to mitigate unnecessary cost and enhance the efficiency of the costs being incurred.
Who presides over these actions?
A finance manager is responsible for making sure that the above-mentioned activities are done in appropriate manner. Finance manager makesthe communication between the organisation and the finance department. It is the responsibility of the finance manager to provide insights on various financial matters.
Role of a finance manager
- Assisting in identification of business services and documenting the value of these services.
- Demand modelling activities are to be assisted by the finance manger.
- Maintaining the service portfolio and keeping it updated at all times
- Keeping financial issues at the minimum by ensuring compliance between the financial department and the organisation.