22 Şubat 2008 Cuma

10 Critical Benefits You Receive by Using Cost Benefit Analysis

If you are called upon to make financial decisions you may find it difficult sometimes to confidently choose the best proposal. Using Cost Benefit Analysis can help.

When dealing with decisions using Cost Benefit techniques it is very important to follow the proven principles. The health of your company and your reputation depend on it. If these rules are not followed then your decisions could be flawed.

Let's start, shall we?

Benefit #1. You can compare competing projects quickly and accurately - saving you time and effort.

Cost Benefit Analysis weighs the total expected costs and compares them to the total expected benefits of one or more actions. The outcome of Cost Benefit Analysis is a Benefit Cost Ratio that is used to compare and rank competing investment options.

Once you apply these techniques you will quickly be able to compare and rank projects with confidence knowing that governments and large corporations use these proven principles.

Benefit #2. You can quickly determine whether a project may be VIABLE or UNVIABLE - quickly cutting out unviable options thereby saving you time and effort.

As mentioned above, Cost Benefit Analysis compares the costs and benefits of competing projects and produces a score (Benefit Cost Ratio) which if less than 1 shows that the project is UNVIABLE (all other things being equal).

This can quickly weed out the projects that will not make the cut, saving time and effort for you and others charged with considering these projects and making a final recommendation.

Benefit #3. You will be noticed and you will gain increased recognition if you use this technique correctly - more opportunities for you.

Since this powerful, proven technique can save discussion time, provide more accuracy and confidence, it will be seen as a real improvement. If you champion its introduction you will be noticed and gain recognition.

Benefit #4. You will be able to more confidently join or lead asset expenditure review discussions - more recognition and opportunities for you.

Once you learn and apply this method you can join in discussions at higher levels and feel confident that your skills can add value to the deliberations. Your input will be recognised and appreciated.

Benefit #5. Learning this very marketable technique will provide you with more options in your future.

There are many ways you can apply these techniques.

You could train others in the skill - both to internal and also to external clients.

You could be the assessor of the methodology PRIOR to projects being reviewed by senior management. This will save them time and frustration if they know that someone knowledgeable has already OK'd the maths and reviewed the assumptions for reasonableness.

You may wish to apply for more senior roles in your current employment or try out in other companies.

Benefit #6. You can apply these skills across small to large projects - making you more versatile.

The Cost Benefit principles can be used for projects as small as a PC replacement to underground assets that form part of large multi-billion capital works programs.

Your Cost Benefit Analysis skills are just as useful at either end of the scale.

Benefit #7. You will become recognised as the authority on this subject - more options for you.

Once you learn the theory and can present your proposal with confidence you will be recognised as the authority on this subject. Others will come to you for assistance seeking guidance for their projects.

Benefit #8. You can be sure that your decisions can withstand external scrutiny - saving you worry and concern.

The principles underpinning Cost Benefit Analysis have been in use since the 1960s by both government and big business. As long as you learn these principles from a recognised source, and apply them correctly, you can be confident that your analysis can withstand internal and external scrutiny.

Benefit #9. This methodology is scalable across small to large businesses.

Successful implementation across the business can only add to your marketable skill set meaning more opportunities for you. This skill could lead to consulting work for external clients - be they large or small - or starting your own Cost Benefit consulting business.

Benefit #10. Once this methodology is implemented it can significantly reduce the time taken to decide on competing projects -saving you time and frustration.

If this method is implemented for all investment proposals across the company then the comparison and choice amongst competing proposals is simplified. All other things being equal the project with the highest Benefit Cost Ratio should be the first to be authorised. The value of the business will increase the most by implementing the project with the highest Benefit Cost Ratio.

Bruce Hokin is an experienced accountant (FCPA) specializing in Cost Benefit Analysis. You can find more of his in-depth FREE articles, FREE Newsletter and e-zines at his website. To sign up for his downloadable Cost Benefit Analysis training program 5 Steps to Cost Benefit Mastery just go to his website. You could be using this technique in under 2 hours! Available at www.thecostbenefitcoach.com.

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