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¶ … Allocation
During a recession, or any kind of economic downturn, IT budgets come under close scrutiny. Organizations want to make sure that they are making the most of their money and IT investments are often among the first to be examined for potential cuts. Furthermore, the way that IT costs are allocated also makes a substantial difference because of the way different systems account for value. For example, under a traditional flat fee system, inefficiencies may be hidden and it can also negatively influence user behavior. This paper will look at some of the benefits and limitations in different accounting systems for IT services.
Flat Fee Structure
A flat fee structure is among the most common forms of IT allocation. The advantages of this system are that it is much simpler to work with....
For example, bundling all of the fixed costs into one cost pool can make accounting and bid work much more efficient and less time consuming. An IT group can allocate the costs that are completely visible to a particular project while distributing the shared or fixed costs by a flat fee measure (Branton, 2010). It has been argued that such an accounting system can reduce costs through its simplicity.
Proponents of such a system argue that more elaborate systems of charging for costs will never be clear cut and ultimately an accountant somewhere will have to make a judgment call about how best to allocate costs (Branton, 2010). Thus, since it will eventually be a matter of guesswork anyway, it is best to keep the costing system as simple as possible. This will not only save time with accounting work but the organization is…
Works Cited
Apptio. (2010, March 16). Activity-Based Costing is the best allocation methodology. Retrieved from Apptio Community: https://community.apptio.com/blog/b/it-financial-transparency/archive/2010/03/16/activity-based-costing-is-the-best-allocation-methodology.aspx
Branton, D. (2010, March 16). How to create a system for charging back IT services. Retrieved from CIO: http://www.cio.co.uk/article/3217465/how-to-create-a-system-for-charging-back-it-services/?pn=1
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