Allocations

When the Financial Management application allocates an expense, it breaks down the expense into detailed amounts of money called allocations.

The allocations are then associated to specific segments and accounts in the IT chart of accounts.

To allocate expenses, the application uses the following items, which comprise your cost model:

  • Allocation rules, which are the over-arching definition that the application needs to break expenses down and allocate expenses to segments. Rules use filter conditions, methods, and metrics.
  • Allocation filter conditions, which specify what conditions that expenses must meet to be matched by the rule. Rule matching means the expense met the criteria, such as the vendor or cost center, that the rule requires. Each rule must use a filter condition.
  • Allocation methods, which tell the rule how to calculate the breakdown of the expense on a percentage or fixed basis. Methods also specify which account from the IT chart of accounts should receive the allocation.
  • Allocation metrics, which contain additional instructions that the application uses to allocate expenses based on a weighted calculation or on a script. A method can use one or more metrics.

Users with the financial management administrator or financial analyst role can administer cost allocations through the workbench, which is the preferred method, or by using lists and forms.

Chargebacks

The application supports "chargebacks", or negative amounts in general ledger expenses that can be used to transfer credits between segments for a shared cost. Chargeback expenses process fixed amount methods in the opposite way of other expenses. For example, a fixed amount type method that allocates $50 on a $100 dollar chargeback, shown as "-100" in the general ledger expense, applies a $50 credit as specified by the rule.

Example Allocations

The demo data provided with the application provides good examples of different types of allocations. You can make several types of allocations, such as allocating:
  • Storage costs based on consumption
  • Private cloud costs based on usage of virtual machines
  • Servers based on cost, CPUs, location, and so on
  • Project management contract costs