What is financial management in ITIL?

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
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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.

ABC of
financial management in ITIL
The financial
management id classified under 3 categories i.e. ABC

A
-ACCOUNTING

B
-BUDGETING

C -CHARGING

Accounting

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.

Budgeting

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.

Charging

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:

Service
valuation

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.

Demand
modelling

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.

Planning confidence

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.

Compliance

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.

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