Predecessors/Before You Begin

ITIL v3's "Financial Management" section in Service Strategy is complex and can be difficult to understand. ITIL v2's "IT Financials Management" section in Service Delivery is another source of information on Financial Management.

Financial management requires an understanding of an IT department's services. Please see Service Catalog Management.

Financial Management

Services have two types of costs:

• direct costs, which are costs that can be specifically pinned to the service, e.g. the hardware required to support that service only
• indirect costs, which are "overhead," or costs that cannot be mapped specifically to the service.

Organizations typically have two types of budgets:

• capital budgets, for new things such as building a new building
• operational budgets, for recurring things such as heating a building

Financial management helps decompose an organization's operational budget into the costs for the services in its service catalog. That is, all operational costs should be tied either directly or indirectly to the offered services.

The cost of the services in the service pipeline should then match the capital budget: all capital costs should be tied to new or re-designed services.

ITIL does not take a position on whether to charge for services. It does lay out three options: not charging, "notional" charging, or charging. "Notional" charging means that IT tells departments how much it would cost, were they to be charged. Charging is sometimes seen as "soft money" when done internally. Charging can be an effective tool for supporting Demand Management.

University-specific risks

University IT departments are sometimes funded from student fees. In this case, Financial Management might more resemble a report explaining how student fees are spent by service provided.

Videos, Photos, and Presentations

Contacts and Resources

• EDUCAUSE's "Financial Management" page
• IT Financial Management Association