Financial Management Applied

Financial Management can be used to forecast the costs for offering a Service and can also calculate the amount that should be charged to the Service Users in order to recover costs.

To use Financial Management as a tool for calculating the financial value of the underpinning infrastructure that provisions services and to qualify operational forecasts, you need to:

• Provide the User access to the functionality

• Enable SLA costing functionality

• Enable the functionality within the Category

• Create the Item Type and enter forecast figures

• Create the Service Item, which automatically applies the forecast figures

• Build the relationships between the Service and underpinning hardware and software, to associate actual costs

• Use Finance Reports to compare forecast costs with actual costs, and chargeback costs to the Org. Unit Users.

• To complete the following outlined process, a User must have Supervisor and Administrator access.

Enable Financial Management Access

To access the Financial Management functionality a User must be assigned the Finance Role within the Information tab of their User Information screen. Assigning the Role within a system synchronized with an authentication server, the system administrator needs to include the User in the Finance group in LDAP.

To switch on the functionality for an existing User in a system not synched with an LDAP server, as a Supervisor:

1. Select the User > Users tab

2. Click on the Name hyperlink of the relevant User

3. Select Edit

4. Tick the Finance box in the Roles field
   
   

5. Click Save.
   The User can now access the Finance Management functionality within the consolidated User view.

Enable Functionality

Financial information can only be calculated for Service Items that are created using a Category, which has the Service Category option enabled. By enabling this option, the Costs Tab is made available with the Item Type where baseline figures can be recorded.

As a User with the Finance Role:

1. Move to the Configuration > Categories tab

2. Click the Service Item Category hyperlink
   
   

3.  Verify the Service Category option is checked
   
   

4. Click Done.

Charging for Service

If the service and support organization is to charge Organizational Units, that is companies or departments, for the ongoing service they provide the costing functionality for the Service Level Agreements (SLAs) needs to be enabled, and the Prices for the different Agreements need to be assigned to each of the SLAs.

As a User with Administrator access, within the Setup screen:

1. Select Setup > Billing

2. Click Yes for the Display SLA Prices option
   
   

3. Click Save
   The Annual, Request and Hourly Price fields are now made available within an SLA Editor screen.

4. Switch to the User Portal to access the Supervisor view

5. Move to the Service > SLAs tab

6. Select the Name hyperlink for an SLA
   The SLA Editor is now displayed.

7. Click Edit

8. Enter the relevant figure in the Annual Price field
   The Annual Price entered should be the per User, per year price for the SLA.
   
   

9. Click Save and Done.
   Repeat the process for all relevant SLAs configured in the system. For detailed information about configuring SLAs see Creating SLAs.

Forecast Service Costs

When proposing a Service as part of Service Portfolio Management, the investment and ongoing costs for offering a Service can be calculated. This information can then be used to project potential revenue for offering the Service and allow consumers of the Service to be charged for accessing the Service based on User access. For an example, we will use the Service Desk Service, considering the investment in hardware and software plus the ongoing SLA expense for offering the Service, when forecasting costs.

To forecast the cost of offering a Service, as a Financial User:

1. Move to the Configuration > Types tab

2. Select the default Service Desk Item Type
   If creating a new Item Type refer to Creating Item Types.

3. Click Edit

4. Search and select the relevant SLAs for the Supported Levels field
   This is where SLAs that have Prices are associated with them.
   
   

5. Move to the Costs Tab
   The Capital, Recovery and Recurring cost fields are now displayed.

6. Complete the following fields:

   Costs
   Capital	Enter the sum total to be invested in hardware and software infrastructure that will underpin the Service.
   Recovery	Complete the field with the number of years designated to recover the costs of implementing the Service.
   Recurring	Enter the ongoing cost, on a per calendar month basis, for offering the Service. For example, annual support and maintenance agreement costs charged on a monthly basis.
   Services	Using the details entered in the Costs fields and the cost per annum of the SLA, enter the forecast number of Customers/Users to calculate the break even point (B.E.P) of the Service. Using the auto-calculated  B.E.P., enter a  per calendar month Price for the Service to recover costs. This figure is used in the Service Item Costs tab to calculate the ongoing Revenue figures. If an SLA with an Internal Cost is assigned to the Type, the B.E.P will be the SLA cost divided by 12 plus the cost of recovering the Capital expenditure over the number of years defined for the Capital to be recovered. For example, where the SLA cost is $240 for the year, the B.E.P will never be less than $20 per month.
   Actual  Costs
   Capital	Content for this field is derived from the Cost field within the Costs tab of  the Item created using this Type.
   Recurring	Content for this field is derived from the Monthly Cost field within the Costs tab of  the Item created using this Type.

7. Enter a figure in the Forecast Users field for each SLA
   (The displayed SLAs are based on the ones assigned to the Supported Levels field in the Information tab.)
   If multiple SLAs are assigned to the Item Type and Forecast Users are assigned to each SLA, the Costs are divided by the total number of Forecast Users as calculated across the SLAs to arrive at the B.E.P. The system does not differentiate between who the Users are, it only accounts for the number of Users

8. Enter the Price for the Service to recover costs in a per calendar month
   Use the calculated Break Even Point (B.E.P.) to set the Price. This figure is then used as a comparison figure for the Actual cost  in the Service Item Costs Tab.
   
   

9. Click Save and Done.
   The forecasted Price per User is now available within the Charges Price field on the Costs tab of the Service Item.
   
   

Calculate Actual Service Costs

To calculate the actual Service Costs, the relationships of the infrastructure Items that underpin the Service need to be mapped within the Relationships tab. Working with these relationships, it should be noted that the Service is considered a Child Item within the hierarchy.

To build the relationship map refer to the Relationships Tab.

After the underpinning infrastructure and its associated costs are related to the Service Item, the following financial information is available in the Service Item Costs tab:

Inherited Costs

Charging Organizational Units appropriately for a Service can be based on figures derived from the Items associated with the Service. For example, the Service Desk is hosted on a server and uses service management software. The costs associated with the server and software are combined to make the Inherited Capital cost, while any ongoing support contracts would be assigned as an Inherited Ongoing cost on a per month basis. 

To derive the amounts from the related infrastructure and populate the fields within the Child Item, the Delegate Costs field must be enabled within the Inherited Costs for the Parent Items and the technique for deriving the cost must be assigned to the CI.

In the Service Desk example, for the server hosting the Service Desk Service it would be appropriate to delegate costs applying the Child Count technique as multiple software/service CIs may be associated with the server. While, the User Count would be used to delegate costs to the service management software.

After the relationships have been defined for the Service and the Inherited Costs applied, the Finance User can verify the forecast numbers by comparing the Inherited Costs within the Item>Costs tab, to the Capital and Recurring Costs recorded in the Item Types Costs tab. Any disparity between the figures should alert the Finance User as to whether the Service is within budget and if relevant, making or costing money.

Finance Reports

The Finance User can access the following Reports within the Reports>Finance tab, to assist with verifying the cost and revenue generated by a Service, and monitoring how a Service is used.