IT and finance issues…is this going to be an issue for you?

IT and finance issues…is this going to be an issue for you?

A topic that is gaining lots of interest of late is the financial treatment of IT investments. Sound boring, well maybe, but if you need to find funds from year to year, or one off for a crucial project then this topic may be crucial.

What we are working on right now is the financial treatment of IT costs as it relates to capital versus operational expenditure. This impacts many people, often in different ways due to varying interpretations.  And the impacts (and no doubt interpretations) will only increase as the use of service based IT (i.e. cloud based computing) becomes more prolific.

Is this an issue in your organisation? We will be keen to hear your views.

And don’t think this is a trivial issue to solve. Firstly there is the interpretation element, and the need to comply with accounting principles and perhaps tax and other regulatory requirements. Then there is the innovative financial structuring options available from finance experts which can package products and services to meet buyers financing requirements. And then finally, there is internal budgeting and funding policies and rules where central finance and treasury departments have long justified and funded IT in particular ways, and are used to constraining operational and capital funding based on the historical treatment of IT expenditure.

There is quite a few issues to understand. My views are:

  1. These issues do need to be understood to remove artificial impediments to organisations generating Return on Investment (ROI) for their business.
  2. Cloud based computing will heighten the need for improved understanding of this issue.
  3. Financial structuring options will allow most things to be done, in most cases, offering ample flexibility
  4. Central financial and treasury departments will need to learn to adapt, otherwise they will soon be holding their organisation back

If you have your own view about this, or are seeing some impacts already across industry then let us know.  Tell us:

  1. Have you had or have you seen others experience roadblocks in this area?
  2. Are you aware of what solutions are being adopted?
  3. Do you think this problem will increase or decrease in the future?

We are in our Research phase on this right now, your input would be valued.

Post your thoughts and comments below…

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