Imagine being in a country where you don’t speak the language and your native tongue or any of the other languages you speak are not understood either. You feel lost and quickly notice that hands and feet can only get you so far in communicating what you want and need.
Both IT and Finance have their own particular language and specific lingo or abbreviations; FP&A, Agile, cash flow, api’s, etc…. As a Finance representative, talking about Finance related issues to the IT management or project managers, it sometimes feels like being lost in translation:
- Q: Where is your budget and what are you delivering with this project?
A: We don’t know yet as we are working Agile. - Q: Is there a business case?
A: First indications with the customer says yes, but we need to further discover as we are talking about innovation and a digital transformation. - Q: Have you covered your risks with controls?
A: We are totally in control of IT, all systems are up-and-running!
Can you see me shaking my head? What can you do with these answers? How do you manage risks, optimise performance and measure results if you get these answers and all is not clear? Are we lost in translation?
The IT Controller As Interpreter
I see the role of the IT Controller or Business Controller IT, as the interpreter between IT and Finance to ensure the communication between both departments improves and misunderstandings are resolved. To achieve the improvements, the IT Finance domain ideally operates on the effectiveness, the efficiency, and ultimately the business value of IT. In other words, are we doing the right thing, are we doing it in the right way and are we creating the worth for the organisation or even the company’s customer.
Business Value Is The Shared Objective
Both IT and Finance are in it together to deliver value for the business each from the perspective of their specific expertise. IT or Finance in itself is not the core of the business in many organisations but are staff functions. IT is more-and-more becoming intertwined with the core operations of a business, becoming an instrumental part in the value added services delivered by the company.
With the increased criticality of IT within the core business delivery, the risk and control component of IT becomes increasingly important. Can we afford to be without IT for a period of time? Odds are that this is directly impacting the bottom line with every hour or even minute more reducing the profits.
First Step to Gain Control
In my experience as IT Controller, I have found that the first step to gain control on the IT expenses is to set-up a solid foundation. This foundation is the (cost) structure in the financial system to ensure that the capturing of the expenses happens in line with the organisational responsibilities and reporting requirements of both Finance and IT. Clear insights in where and how costs are registered is essential to enable the right level of controls on the spending. It provides the basis to make the right decisions on IT investments.
Which Elements to Consider
Some elements to consider when setting up a new financial (cost) structure are:
- The IT organisation and departments (countries, locations, headcount, etc…)
- The services and projects delivered by IT as well as the overall architecture
- The non-IT organisations (potential for recharging with e.g. headcount numbers)
- The boundaries of the financial system, tax treatments and legal limitations
- IFRS, GAAP or other leading principles
- The current IT-specific accounting set-up/ structure
Based on these elements, the new structure enables answers to the questions from the introduction that make more sense; the foundation aims to reduce risks, increase accountability, improve reliability and create transparency. As an added benefit of getting an experienced interpreter and implementing the structural improvements; lower IT cost levels are almost guaranteed.
Next Steps, Next Level
The improvements in the financial system will not take away the headaches immediately. There is a lag before the benefits materialise and then the next steps can be taken to bring the IT Finance & Control to the next level of maturity. Each of these steps will be further detailed in following articles.
Are you ready to reduce headaches by unlocking the powerful flywheel of structural improvements to lower IT cost and at the same time reducing risks and becoming more transparent? Feel free to reach out to discuss further.