Opinion: Five steps to better cost control

By Jo Ann Rosenberger
18 Oct 2011 View Comments
Jo Ann Rosenberger

CIOs can use the following five best practices to help them establish, implement and manage processes that will enable them to understand more accurately existing and future spending patterns and to make cost-optimisation decisions.

1. Promote collaboration between departments. Organisations with effective IT asset management (ITAM) processes understand and track the interdependencies, relationships and nuances between assets. Regular communication between ITAM, IT finance and procurement personnel enables IT finance to assess properly and report accurately the financial impact of changes to assets and their related expense accounts. Their collaboration can help to ensure accurate reporting of the analysis and explanations of the variances after receiving the monthly profit and loss statements.

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2. Recognise the need for detailed expense tracking. Without detailed expense-tracking processes, CIOs can misunderstand and report variances inaccurately, which can lead to inappropriate spending and forecasting decisions. These processes are key to determining the impact of variance on the annual budget.

3. Implement an expense-tracking mechanism to manage spending. A detailed expense-tracking mechanism is essential for managing individual departmental spending. It enables CIOs to compare actual-to-budget expenses effectively, identify and report variances, and project the impact of these variances on the remaining year. It also helps to develop and analyse “what if” scenarios to determine the impact of operational changes on expenses.

4. Use detailed expense reports for planning and forecasting. Throughout the year, IT department budgets change as a result of factors such as unforeseen user/client needs, new technology requirements and expense variances related to actual year-to-date spending. CIOs should analyse these changes and explain variances with the help of IT finance and ITAM personnel to determine how they will affect their budgets. These processes will enable CIOs to manage their budgets, identify cost-reduction opportunities and reforecast the annual budget on an ongoing basis.

5. Closely manage IT finance’s  pro­cesses. Processes are most effective when they deliver accurate decision-making data to CIOs and report the right information accurately at the appropriate level of detail. CIOs must ensure that the processes, and their implementation, are fit for purpose by asking IT finance staff the right questions and guiding them to achieve the right type of analysis and reporting that enables effective executive decision making.

 Jo Ann Rosenberger is a research director at Gartner

 

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