Financial Accountability Drives Good Governance

Departmental and business unit heads know that IT systems underlie nearly all business initiatives. Yet they tend to undervalue or overuse IT unless it hits expense budgets, hence, the surging popularity of charge backs and IT cost allocations. These internal billing mechanisms force budgetary owners in the business to account for the costs, and therefore the value, of their IT systems. One by-product of this IT financial consciousness is that internal customers become naturally engaged with the overall IT governance process: how IT priorities are set and how those priorities affect their initiatives become topics of great importance to them.

Detailed and correctly allocated financial management of IT initiatives is a management challenge that has historically been difficult to address. Aside from the emergence of charge backs, American companies have found that reporting for compliance with the SOP 98-1 standard has also emerged as a driver for the need to track labor and costs on IT projects accurately. This U.S. accounting standard alone, which allows for the capitalization of costs expended in the latter stages of a project, can lead to major reductions in reported expense levels.

Thus, accurate time, status, and expense tracking are now as important to finance as they have always been to the project and program manager. However, capturing the transactions to support this level of reporting, backing up the transactional flow with proper project accounting, and then posting the resulting entries to the general ledger require a financial management module that is tightly integrated with the core project and process management modules. By enabling charge backs and SOP 98-1 reporting for capitalization, IT financial management systems drive widespread support for proper IT governance.

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Project Management Made Easy

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