What to Include on a Cost Benefit Analysis Template

A cost benefit analysis template is a "fill in the blanks" tool for completing a cost benefit analysis on a potential business decision. Managers can use Microsoft Excel or any other spreadsheet to develop the right cost benefit analysis template for a particular business decision.

By building the right cost benefit analysis template, a business manager can compare a course of action in a rational manner, avoiding many of the potential biases that can lead to poor business decision making. Failing to take due diligence up front and using a flawed model can be a costly misstep in any industry.

What to Include in a Cost Benefit Analysis Template ?

Using the power of Microsoft Excel, you can include separate sheets for direct and indirect cost calculations, and feed them into an integrated cover sheet.

Some of the direct costs critical to an accurate cost benefit analysis template include:

• - capital equipment and durable goods costs,
• - tax and fee costs,
• - outsource or consulting fees, and
• - subscription or annual recurring costs.

Indirect costs that feed your template should include:

• - training costs,
• - facility expansion costs,
• - labor related to implementation,
• - changes in overhead such as utilities or transportation, and
• - any cross-business unit costs.

The last is particularly critical. For instance, if the sales team moves to changing minimum or maximum order quantities, it may create a cost for an operational unit that is not a direct participant in the decision making process.

There are many sample cost benefit analysis templates available on the internet and others are incorporated into such software platforms as ERP software. Which model you choose to use depends on which one addresses the level of detail you need.

On the benefit feeder page, it should include any savings due to price, reduced ordering costs, reduced transportation costs, reduced labor costs, increased revenue opportunities, reduced inventory carrying costs and any other positive revenue or reduced cost impacts on cash flow.

Time Factor in Your Cost Benefit Analysis Template.

Different companies have different standards for payback on capital investments. When your cost benefit analysis template is evaluating the ROI on a capital investment, it must cover, at a minimum, the period set by your company as an acceptable ROI.

In some industries, a project must self fund within a year. A common period is three years. Some companies with long-horizon planning accept a 5-year ROI even as they use a 10-year amortization schedule or depreciation schedule on the capital investment.

Your cost benefit analysis template should show the yearly and cumulative ROI status. By looking at impact over time in a comprehensive template, you are looking out for the welfare of your business.

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