Financial Cost Calculation

15 min

Before getting started

It is necessary:

To have defined the access permission to the functionalities of the Financial Management;

To have permission to use the functionality;

It is necessary to have done the financial entries, created the financial cycles and classifications;

Based on the financial entries Register financial item and the "cost distribution" and "set price" tabs, it is possible to monitor all cost details (Hardware purchase, hardware maintenance, software purchase, software licenses, facility including utilities, personnel, etc.) according to the financial entry;

This monitoring of cost details can also be done through reports.

Procedure

Access the main menu Processes > Financial Management > Financial Cost Calculation;
In the Financial Cost Calculation main screen, we have the following actions available:

Action	Description
New	To create a new financial cost calculation
Generate CSV report	To generate a report of CSV
Advanced Filters	To set the filters to find a cost calculation already created
Edit	Once selected a cost calculation already created, this option will appear to edit it
Remove	Once selected a cost calculation that has already been created, this option will appear to remove it

Registering/Editing Financial Cost Calculation

To create a new cost calculation, click on "New";
To edit a cost calculation already created, search for it, click on it, and then on "Edit";
Select the period you want, for example, 12 months (January to December);
Select the service you want to make the financial calculation;
Enter the minimum rate.

🖊 Note: On a simulation, mark on the "Forecast" checkbox.

Field	Description
*Start date ()**	The start date for the cost calculation
*End date ()**	The date to finish the cost calculation
*Service ()**	Select the service you want to make the cost planning
*Minimum rate ()**	Set a value for the minimum rate
*Forecast ()**	Select to forecast the cost

(*) Indicate mandatory fields

🖊 Note: Select the start date and end date to make the 12-month Plan.

6. After completing the fields, click on "Generate" to present the values. It will generate three tabs for values information:

Calculation of NPV and IRR

Based on the information added in the "Financial Item" functionality, the tool will present the values according to the information and calculation presented in the fields:

Field	Description
Month	The month of reference to present the costs
Investment	The value of the investment
Revenue	The value of the revenue
Cost/Expense	The value of cost/expense
Result	The value of the result
Present Value	The present value
Net present value	The net present value
Internal rate of return	The value for internal rate of return

Cost by Category

This tab presents the appropriation of costs by categories. Here are these categories: Investments and Cost distribution.

Investments

Field	Description
Category	The category of the distributed cost
Scenario variation	The percentage for the variation of scenario
Cost	The fixed cost number
%	The percentage reached
Total	The final value of the investment

💡 Tip: Scenario variation: this field allows to make financial variations

Cost distribution

The calculated costs will be appropriated in the respective services and configuration items according to the apportionment or fixed values defined in the financial entries on the Register Financial Item and will be automatically associated with the service and the CI.

Example: Roll-up cost of a customer-facing service (e.g. e-mail) with the breakdown of the costs for the systems (e.g. MS Exchange, Lotus Notes) and the associated supporting IT infrastructure (e.g. servers, databases, network, storage) and applications.

Field	Description
Category	The category of the distributed cost
Scenario variation	The percentage for the variation of scenario
Cost	The fixed cost number
Cost breakdown	The breakdown cost

💡 Tip: Scenario variation: this field allows to make financial variations

At the end of the page, we will have information about the number of months, Investment apportionment per month, Average cost per month, and Total cost per month.

Set Price

Complete the fields available to set the prices. In the "How to price" field, select how to make the price, the options available are: Fixed value, Variable value, or Both.

If you select the Fixed value option, complete the fields:

Based on the selected service in the previous "Cost by category" tab, the costs for the selected service will be displayed and the final service price (Final price) using will be calculated "cost" and "profit" fields.

The calculated values may be updated and published in the service catalog and in the service level agreement (gold, silver, and bronze).

Field	Description
% Profit margin	Set the margin you want to work with
Cost	Set the fixed cost
Final price	The final price for the fixed value

If you select the Variable value option, complete the fields:

Based on the service selected in the previous "Cost by category" tab, the costs for the selected service will be displayed and the service price will be calculated using the "Estimated quantity", "Monthly unit value" and "Profit Margin" fields.

The "Estimated quantity" and "Monthly unit value" fields are related to the demand metrics and will be calculated through the "Integration flow of quality capture" to generate the varied price, respecting the business rules and the profit margin.

The calculated values may be updated and published in the service catalog and in the service level agreement (gold, silver, and bronze).

Field	Description
What is the unit of measurement	Set the unit of measurement
Estimated quantity	Set the amount
Do you accept less than expected quantity?	Select if you accept it or not
Monthly unit value	Once completed all values in the previous fields, it'll appear the monthly unit value, with the information of % Profit margin, Cost and Final Unit Price
How to calculate the amount monthly	Select how the calculation will be made: Informed manually or Automatically calculated
Integration flow of quantity capture	Integration with internal and external systems to capture the amount of (access, services, working hours) made

💡 Tip: In the "How to calculate the amount monthly", if it is selected "manually", the values should be manually informed; if it is selected "automatically", the integration workflow should be selected to the contabilization of services executed.

For the "How to price" field, at Both (fixed and variable costs) option, it is possible to set a fixed cost for some cases and, if the number is not reached, it is possible to use variable costs.