How to create a cost-benefit analysis?
To put it simply, the cost-benefit analysis compares the costs with the benefits. This view is a pure economic efficiency view. You can identify very quickly the project with the greatest minus or the greatest plus, taking into account the underlying costs.
What is a cost-benefit analysis?
Cost–benefit analysis, sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings. – Wikipedia
A cost-benefit analysis should always be carried out before a specific project.
Creation of a cost-benefit analysis in five steps
- Define the project and possible alternative actions
- Weighting alternative actions of the project with regard to the effects
- Compare the costs of the project with the alternative actions
- Also compare the benefits (or output, e.g. additional sales, time savings, etc.) of the project with the alternative actions and evaluate them objectively
- Scoring and analysis of all alternative actions
The domains of a cost-benefit analysis can be diverse and it can be used in almost every industry. They are mainly used when you want to increase the output (turnover) or gain time with the project.
Domains for a cost-benefit analysis:
- Introduction of new machines (IT, production, etc.)
- Development of the staff’s knowledge and know-how
- Introduction of new production processes or manufacturing methods
- Reorganization of work processes
Since the domains are diverse, we also briefly list the benefit types in order to be fair.
Benefit types of the cost-benefit analysis:
- Increase in sales
- Shortening the production time and thus saving time
- Improvement of workflow or the entire operations
- Increase of motivation
- Greater customer satisfaction and fewer complaints
Cost-benefit analysis with KLUSA
In KLUSA, the cost situation of single projects, but also on a multi-project level, can be summarized in absolute figures as well as percentages or displayed graphically; additionally, there are various limitation and comparison options as well as intelligent version comparisons for plan, actual and forecast via filters and settings.
The cost input for the individual projects can be done manually or automatically via interface.
The potential benefits of a project or of subprojects can be displayed for the duration and the estimated impact on the years after the project has been completed. These potentials – be it savings, expected profits, etc. – can be an important criterion for the approval and implementation of a project. You can rate several projects once or recurring yearly with regard to the entered benefit. Also, you can managed plan and actual data here.
Based on existing cost and benefit data, the above-mentioned cost-benefit analysis for a project can take place in the Economic values view. If required, values of risks and opportunities and their measures or the project budget compared with the income can also be included in KLUSA. You can include data from all plan versions, and also a change request and a copy or report.
See also datasheet cost management.