Effective cost management is dependent on understanding cost structure and analyzing the costs used in that structure. Having the right financial tools, such as an IT chart of accounts, can expedite and enhance cost management and budget processes.
To help you do so, you can customize this IT chart of accounts, which we’ve provided as a downloadable template. It’ll be useful when you’re using a category view during the cost management approach. The category view model is one of two views typically used, as explained in this TechRepublic article. It plugs specific expenses into cost/account categories such as hardware equipment, software equipment, telecom costs, and outside services.
While the IT chart of accounts template focuses strictly on IT categories, its author, Peter Hennigan, points out that it can easily be customized to include other cost categories, such as salary, benefits, and travel. Hennigan does advise that you keep your IT chart of accounts specific: “The sample chart of accounts was intended as a list of accounts with descriptions rather than a budgeting spreadsheet.” While the template can be morphed into a general budget sheet to increase the level of expense tracking and detail, there is no reason to do so, he said.
“You could add additional accounts depending on how detailed a particular organization wanted to get with tracking expenses; however, I think it makes sense to remain at the levels outlined, as there are drawbacks to increasing the level of expense-tracking detail. Individual organizations must decide what is best for them,” said Hennigan. One drawback is that the tech cost spending can be lost within the other cost budget lines.
Most managers are familiar with the common cost categories, but many are unaware of all the available cost categories, making a true representation difficult to attain.
“While the categories provide the foundation for the IT chart of account view, it’s the chart of accounts that defines and documents them,” said Hennigan.
Building the IT chart of accounts with specific IT categories allows the reporting of actual spending to create value, explained Hennigan.
“Standard cost categories, such as equipment and fees, are too general to provide any useful IT cost management information. Consequently, the IT organization must expand the standard chart of accounts to meet its needs,” he advised.
“Information reported in meaningful categories, over time, positions managers to answer the three questions that effective cost management poses: What are we spending on, how much are we spending, and how is it changing?” said the financial expert.