Why Cost Allocation Matters

4 minute read

Team Cimpl

Allocating costs to the right individuals, departments and business units is the 48th reason to go beyond Technology Expense Management (TEM) and manage the enterprise digital footprint.

When you have recognized the importance of expense management, the next step is to dig in deep to understand what are the factors and influencers of managing costs, especially telecom and IT expenses. One of the most important pillars of expense management is cost allocation. Cost allocation is the process of linking a cost (or group of costs) to a particular department or division, or a good/service produced by a company. Why cost allocation matter? At its core, cost allocation is not only about monitoring the money spent by the organization but also about allocating the cost to the right individual, department and business unit it is associated with.

The Benefits of Dividing Costs Logically

Cost allocation seems like a simple process of linking a cost to its source, but what happens when you have thousands of devices, assets and services, tangible and virtual? It quickly becomes a ponderous process. Organizations have thousands of employees and various assets and services that are used by individual employees, department or even whole business units. For example, there are individually-ended services such as mobile numbers and internet lines, used by individual employees, but on the other hand services such as VoIP, servers and circuits serve many resources at a time. The cost associated with employees need to be allocated individually, the cost of resources used by a group of individuals of a department should be allocated to the department and, finally,  the costs associated with services used by all employees of a particular site need to be allocated to a business unit. This is why cost allocation matters.

Cost allocation benefits businesses by managing the cost and avoiding unnecessary or unwarranted spend associated with IT and telecom assets and services. It provides transparency of usage and clarity into costs and potential savings through identifying zero-usage and discrepancies on a continual basis. Ultimately, costs associated with the right business units need to be managed, as you can’t reduce your spending until you know where you are spending. Now, how can you allocate your cost efficiently?

Where Technology Expense Management Comes In

Technology expense management offers businesses a way to gain key insight into costs and usage associated with IT assets and services and allocate the costs by employees, department and business units for the entire company painlessly. A large part of why businesses choose to adopt some form of expense management solution is that it provides visibility into areas of work that can often fly under the radar. In fact, it provides businesses with the information and the tools needed to be able to identify the costs associated with telecom, IT, IoT, cloud, M2M, UCC, and many more assets. This gives insight into areas where your organization is spending the most, how much certain services are costing, whether or not you’re being over-billed, and so forth. Essentially, it provides you with the details necessary to fully optimize technology spend so that you can get the most out of your investments.

For instance, whenever an employee leaves or joins the company, the information and cost associated with him/her are relayed to the technology expense management software automatically. In case of any lost, damage or zero-usage of an asset, the technology expense management software optimizes the cost associated to it. Much like it, if a business unit relocates from one location to another, technology expense management software updates the cost under the business unit and manages the cost allocation automatically. In a nutshell, technology expense management allocates and optimizes the telecom and IT costs for a company, and manages its inventory to save time and money for the organization.

Allocate Your Costs with Cimpl

Cost allocation shouldn’t feel like a chore. Allocate your costs efficiently with Cimpl to avoid surprise costs and gain insight into what technology you are actually spending on. Ready to learn how? Book a demo, it’s that Cimpl.

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