Aside from tracking service quality, tracking service cost is essential to determine the business value of a service. Organizations typically use their finance system to break down their cost into the cost of labor and the acquired assets. But this cost information does not become meaningful to management until it is broken down by service.
Without an accurate overview of service costs, executives unknowingly overlook major gaps in their understanding of their businesses’ operations and finances and the value each service provides to customers and the business. This is often a result of a lack of understanding of what effective service cost tracking entails and how companies can go about closing information gaps so that they have complete enterprise visibility.
For cost-tracking information to be helpful, it must be possible to break down the service costs in different ways. Being able to see which components contribute most to the cost of a service and which cost components are increasing the most allows management to identify areas where spending might need to be reined in. The three major components of service cost tracking are time spent, assets, and underpinning services. Each of these components represents an area of service cost that could potentially be overlooked by businesses.
The first and often largest cost component for many businesses is time. Business leaders often attempt to calculate this by adding the time spent on relevant customer service, maintenance for service upkeep, and direct improvements on service delivery. A comprehensive overview of time-related costs, however, must include time spent by contractors and suppliers, as well as the time overhead associated with consistent service delivery.
Another key component of cost management is assets. Business assets can range from office furniture to mission-critical software. Depending on its size and financial value, each asset is paid for and expensed differently. Unlike small purchases, large assets are often expensed over a period of time during which their value might not remain static. Maintenance of these assets is yet another cost consideration that is often overlooked by business leaders when doing financial analysis.
Lastly, businesses do not only have service-related costs. Underpinning services that enable IT and HR departments to function must also be included in the overall cost. As more businesses go online and more companies adopt a hybrid work model, services such as cloud-based storage and collaboration tools also add to the overall operating cost. Identifying the costs associated with each of these services and linking them to a quantifiable business value helps executives understand the extent to which these costs increase profits and operational efficiency.