Why Budgeting, Forecasting, and Cost Control Matter More Than Ever.
As organizations increasingly rely on digital tools, the need for clear financial accountability in IT becomes crucial. IT Financial Management (ITFM) offers a structured approach to aligning technology investments with business value.
What is IT Financial Management?
ITFM is the practice of managing budgeting, accounting, and charging activities related to an organization’s IT services. The main goal is to use IT resources efficiently, and that the organization benefits from its investments in technology.
- Budgeting: planning the IT spendings.
- Accounting: Spend tracking and Forecasting - Collecting all the actuals and compare them to the plans created during the budgeting process.
- Charging: cost allocations to record the costs and decide how to allocate them.
Chargeback: the costs related to certain business units and charged that way.
Showback: the full cost is split between different business units (for example cloud storage cost is divided by the extent of storage used by individual units).
The importance and purpose of ITFM
The main principles in any IT finance related effort are the visibility, accountability and transparency of all IT costs. But if we are talking about finances, it is not enough to see all the costs, we have to make sure that this information can be utilized for planning and forecasting as well.
Basically, ITFM is all about 3 main tasks:
- Collecting all the actual costs in a 360-degree visibility: this is what ServiceNow offers to us by providing the connection between financial data and operational activities.
- Investment Planning and Funding: this is what Strategic Portfolio Management (SPM) offers to us.
- The ability to compare these two to optimize both processes.
The key to actuals in ServiceNow: Expense Lines
In ServiceNow if you want to analyze IT actuals, it all comes back to Expense lines. This table and its records contain all the information related to the costs:
- Core data: amounts, important dates, lifecycles
- Allocation data: cost centers, business units, Purchase Orders and Contracts
- Ability to handle depreciation if needed.
- Further customizations to find other connection points and groupings.
The expense lines can be bound to any record on any tables. There are already out-of-the-box bindings to assets and all types of tasks. And these connections mean that expense lines can show us everything regarding the main ServiceNow modules.
Download Your Free White Paper to Discover Proven Use Cases and Benefits
ai-powered-interconnected-tech-workflows-webinar-downloadable-2e1740ac4e.pdf
2.45 MB
How ITFM Integrates with ServiceNow Modules
SPM is the perfect place to manage financials in ServiceNow. The module offers extensive planning on project and portfolio level by pouring the expected costs into cost plans. Additionally, by using Resource Management, ServiceNow creates more cost plans based on allocations and rate models on group levels.
In the Forecasting part ServiceNow provides tools to compare the plans with the actuals in expense lines created, bringing spend tracking to life.
Finally, Dashboards can be created from scratch with out-of-the-box and customizable reports working with real-time data. These reports can show us all the costs, breaking down to departments, business units, service offerings or products.
Asset Management provides a lot of actuals, considering each asset in ServiceNow creates an expense line, either for hardware or software. This huge dataset allows us to analyze the asset costs based on different levels.
Additionally, License Management creates opportunities for analyzing the utilization of software licensing to find pain points, where a cost increase can be expected or a cost cut is possible.
Contract Management is also a part of ITAM, and the table Contract Rate Card contains all the important data regarding the expenses related to the contract. The Contract Management Overview module provides a great place to check on the expenditure.
In the case of ITSM, Financial Management offers visibility to service costs through CMDB which provides enough financial information to find overspending and redundancy.
Since ITSM is about locating and repairing problems in service providing, it is also important to track the costs of this process. Creating and managing timecards provides us with information on how much time our teams spend on each incident or problem. Meanwhile, the Change Management department administers the costs related to the solution.
Enterprise Architecture is about the optimization of technology infrastructure within a company, so it is essential to bind it to financial measures.
With the help of Total Cost of Ownership (TCO) EA helps us to understand the utilization of IT infrastructure. We can optimize and rationalize our procedures with cost reduction by finding overlapping applications.
Download Your Free White Paper to Discover Proven Use Cases and Benefits
ai-powered-interconnected-tech-workflows-webinar-downloadable-2e1740ac4e.pdf
2.45 MB
Conclusion: Implementing ITFM
ITFM implementation is not an easy task, since it is not a stand-alone module within ServiceNow. It is complex and connects to everything on the platform. But this complexity is what makes it valuable in ServiceNow.
It provides a full, unified view of all costs, data-driven planning, improved vendor and asset cost control, investment alignment and cost optimization.
Stakeholder Benefits
- Finance Managers: have full visibility of IT spendings to make informed decisions on investments and cost optimizations.
- Budget Analysts: can access real-time data, automate work regarding budgeting and forecasting, and use advanced tools for variable analysis and financial reporting.
- Project and Portfolio Managers: have better options to align investment funding with company goals and strategies, and to track financial health of their projects and portfolios.
- Asset Managers: can track assets over lifecycles and optimize asset usage to avoid waste of resources.
- Enterprise Architects: can perform analytics on TCO and identify redundant and overlapping systems.
- Service Owners/Managers: have a better understanding of costs regarding service delivery to make changes for optimizations and to create better service pricing.