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When someone uses the word cost-benefit, they’re normally referring to the scale of the cost applied to a project, product, or service to the value obtained by the resulting benefits. Check out cost estimate checklist excel for preparing cost management sheet.
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Key Features Cost Benefit Analysis Template?
Cost Benefit Analysis is a decision-making method that gives you the ability to evaluate the strengths and weaknesses of intangible and expected outcomes for a given amount of capital invested.
Organizations use this technique to identify the associated benefits for a given cost. Analysts calculate and estimate both tangible and intangible assets associated with a certain amount of financial resources.
- XLS format (20017 to 2016)
- Breakdown Chart pf cost benefit analysis
- Risk response plan excel
In simple words, Cost Benefit Analysis calculates whether the project, process, product, or service is worth the required investment or not. It is a process used for making business and economic decisions. This technique judges multiple possibilities and gives you the ability to choose the optimal one.
Construction Cost Benefit Analysis
It is extremely difficult to find a business opportunity, especially if you are new in the industry. Profit calculations and estimations are based on correct predictions. They can neither be made on erroneous calculations nor can be made by a naive person. Therefore, Cost Analysis is used.
For example, let’s suppose we have a business opportunity to invest money in land resources. It will require a lot of cost, effort, and time.
Also, other factors are involved such as cash flows, discounting, sensitivity analysis, environmental costs, risk identification, etc. On the other hand, we have an opportunity to invest the same amount of money in something more profitable with less amount of effort required. Therefore a logical and rational decision making is required which can be done using Cost Benefit Analysis.
Cost Breakdown Analysis Excel
The first step of the Cost Benefit Analysis involves remembering, brainstorming, and writing down a thorough list of all the costs involved in the project, product or the potential service to be delivered.
Related Link: Work Breakdown Structure Excel
These costs can be:
- Direct Cost (Raw material, manufacturing and labor charges, etc.)
- Indirect Cost (Scope cost, Excessive Resources such as labor, material, bills, etc.)
- Intangible Cost (Taxes, Productivity cost, Customer Goodwill, unexpected charges, loss of value, etc.)
- Risk Cost (Risk identification charges, Risk Management, Risk Regulatory Plans, Alternative Plans, etc.)
The second step is the calculation expected potential to benefit from the amount of capital invested.
These benefits include:
- Expected amount to the profit generated from the initial investments
The Project Manager or Analyst keeps in mind the following considerations while calculating benefits:
- Governmental and Industry standards and regulations while making benefit approximations
- Increased percentages of salaries, wages, cut, etc. in the final approximation
In the final step, all the costs and befits are summed up and compared. A final decision is made depending upon the numbers of costs and benefits. If the opportunity is favorable, it is selected and is further worked on. If it fails to meet the criteria, the alternative methods are followed.
How to Create Cost Benefit Analysis in Excel?
Following are some key influences of Implementation Planning:
- A better grip on Internal Rate of Return
- A better grip on Environmental costs
- Detailed understanding
- Moreover, Clarity of idea and opportunity
- Also, Risk analysis and working of Sensitivity factors
- Point of view of multiple analysts
Elements of Cost Benefit Analysis
The basic elements of Cost Benefit Analysis involve these four steps.
- Determination (Identification of all costs involved in the project)
- Estimation (The estimated number assigned to all the identified cost)
- Itemization (Substantiating the claim for choosing the benefits)
- Return Of Investment (ROI) calculation (Ratio of cost invested in the profit generated)
Excel Worksheet Based Cost Template
The template of Cost Benefit Analysis excel can range from simple to extremely complex. It depends upon the amount invested, the scope of the project, people involved, resources utilized, effort, risk involved, etc. For a simple idea and less amount of capital, template would be just a brief description of tasks and the order in which they will be performed. But for an unusual and unconventional idea, the CBA would be extensive and will take more than a simple list to complete.
Related Link: Expense budget spreadsheet
This can be done using MS Excel. Jot down all the costs and benefits with the calculation of all the other factors. Finally show the percentages of profit, risk, cost, etc. using MS Excel charts, histograms, graphs, etc.
Finally, if you have understood this method, a best practice would be to practice it for a number of times using your own simple or extensive ideas.