Financial Accounting accounts (tracks and records) for all costs incurred. It enables the attribution of costs to customer service provided. It should aid investment, renewal decisions, and identify poor value for money, but without going into more detail than required. For example, charge a fixed amount for an agreed capacity. Identifies cost of changes, and performs ROI and cost-benefit analysis.

Financial Accounting enables an organization to:

• Account for the money spent in providing IT services
• Calculate the cost of providing IT services to both internal and external customers
• Perform cost-benefit or return-on-investment analyses

The goal of financial accounting is to understand:

• What drives the IT costs
• Whether IT delivers a good value for money

You have to start to analyze to what extent you want to analyze these topics and from which kind of analysis your IT performance would improve most. That is, IT cost transparency, understanding of cost driver, understanding IT process cost, understanding of linkage of business performance and IT cost drivers, understanding service costs, and understanding platform costs.

Initially, you have to establish the financial accounting framework. Therefore, you identify and set the scope of financial accounting and the accounting policy. Here you define:

• Reports and structure needed to reach these goals
• Business and IT events driving the IT costs

This is the base for the Financial Accounting Framework. This framework consists of different parts:

• Information model:
  • Cost model – per cost unit, per system, per service, among others
  • Cost drivers – from performance data
  • Value model – service model and IT scorecard
• Process and workflow as described later:
• Tools: Focus of the tools is to gather the information from different sources and compile reports automatically from this data, helping to answer the IT goals. The tools needed come from these families:
  • Data mining tools
  • Data gathering tools – fueled by the performance data
  • Reporting tools – provides the performance data

Requirements for the Financial Accounting Framework will also be derived from Service Pricing and Contract Administration, as the pricing framework has to be represented in the accounting framework, and also from the overall financial management strategy.

After the framework has been implemented, Financial Accounting is an ongoing activity. On a regular basis:

• Cost data has to be gathered
• Performance data (like operational monitor data and labor data) have to be imported
• The data has to be calculated, analyzed, and linked according to the information model
• Reports on IT Performance (cost versus value) for the different stakeholders have to be generated
• Trends have to be identified and analyzed
• Actual financial data are reported to perform budgeting

Besides these cost and value analysis related activities, Financial Accounting includes some additional tasks:

• Collect, check, and pay bills to the suppliers
• Create financial reports, especially to serve legal requirements and requirements of corporate finance, such as depreciation of assets
• Support the investment appraisal process from a financial point of view