Allocating expenses

  • Release version: Zurich
  • Updated July 31, 2025
  • 2 minutes to read
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    Summary of Allocating expenses

    Expense allocation in ServiceNow enables you to assign expenses to the appropriate business entities responsible for those costs. This process is not charge-back or billing but can serve as a foundation for billing activities. Its main purpose is to accurately represent which consumer or department has incurred specific expenses by applying defined allocation rules.

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    Key Features

    • Expense Allocation Rules: These rules define how expenses are assigned to business units or cost centers based on various criteria such as expense source and status.
    • Simple Allocation Example: Expenses related to servers can be allocated directly to the department responsible for the server, with 100% of the expense assigned accordingly.
    • Complex Allocation Example: Allocates business service costs to multiple consumer cost centers proportionally, based on usage units representing service consumption.
    • Allocation Units and Relationships: Units represent capacity or consumption metrics for a service. The system uses these units and cost center relationships to calculate allocation percentages.
    • Expense Allocation Records: These show how individual expense lines are distributed among business units or cost centers, providing transparency and traceability.
    • Advanced Allocation Rules: Script-based rules, such as Process Svc-CC Relationships, enable complex logic for allocating expenses from business services to cost centers.

    Practical Application for ServiceNow Customers

    By defining and applying expense allocation rules, you can accurately track and assign costs to the right business units or cost centers within your organization. This helps improve financial transparency and supports downstream processes like budgeting or billing.

    Use the Financial Management application to manage allocation rules, view service consumption details, and analyze how expenses are distributed across your organization. Adding the Expense Allocation related list to forms allows you to review allocation details directly on expense or expense line records.

    This capability is particularly useful when allocating shared service costs, such as IT services, to multiple departments based on their actual consumption, enabling fair and accurate cost distribution.

    Expenses can also be allocated to a business entity that is responsible for the expense.

    This is not considered charge-back or billing but could be used as a source for billing. The primary purpose of expense allocation is to represent the consumer of the process that has incurred some expense. This can be accomplished by defining expense allocation rules.

    Simple Example

    This example demonstrates allocating every server-related expense line to the department responsible for the server.

    To view the example:
    1. Navigate to Financial Management > Expense Allocation Rules.
    2. Remove the list filter to view inactive rules as well as active ones.
    3. Select the Server - Department rule.

    The rule states that for every expense line associated (Expense source field) with a server that has one of the selected statuses, generate an expense location record for 100% of the expense amount and assign the allocation to the server's department.

    To view expense allocations, add the Expense Allocation related list to the form. The Target field is the business unit that the expense is allocated to.

    Complex Example

    A more common example would be to allocate the costs of a business service to the business consumers. Since cost centers are generally used when referring to business finances, this example allocates business service costs to each cost center that is consuming the service and bases the amount allocated on the amount of the service the cost center consumes.

    To view the example, navigate to Financial Management > Business Services and select Retail. Switch to the Cost view to gain access to additional related lists.

    The Allocation Units record defines the amount of capacity that this service provides. In this case, the Retail service can support 50 locations (units), of which 45 are allocated. A unit is a generic concept that can represent something that makes sense for that business service. This record uses units to represent allocation. The objective is to use the unit count and the cost center unit count to determine a percentage of total to calculate the allocation amount.

    The CI Cost Center Relationships list shows which cost centers are using the service and how many units they are using. This information is used to determine how much of the service expenses to allocate to each cost center. For example, the Trading department is using 10 of the 50 allocated units, so they will be allocated 20% of all Retail expenses. There's also an option to allocate based on the total (10 or 45).

    To see how the expense lines are allocated, select an entry in the Expense Lines related list and add the Expense Allocation related list to the Expense Line form.

    The following is an expense from the dbaix901nyc server for $2,500. Two expense allocations are generated from the expense. The Trading cost center was allocated $500 (20%) of the expense based on the CI cost center relationship seen earlier.

    This type of business-service-to-cost-center allocation is accomplished through the Process Svc-CC Relationships expense allocation rule. This is an advanced rule that uses script to determine the allocation logic.