A cost benefit analysis template is a systematic approach to estimating possible profit from investments to achieve benefit. It is a process by which organizations analyze the strengths and weaknesses of alternative and use best procedure to achieve benefit. It is also known as benefit cost analysis.
Cost is the value of money that is used for investment. There are many types of cost used in cost benefit analysis.
- Direct Cost: It is directly associated with project like budget used for manufacturing, raw materials, inventory.
- Indirect Cost: This cost is not directly associated with system like cost electricity, utilities and rent.
- Intangible cost: The cost which cannot be accurately assessed like human resources.
- Opportunity cost: It includes alternative investment.
Benefit are desirable advantages gained from the total investment. Some types of benefit discuss here:
- Direct benefit: This type of benefit is specific and fix.
- Indirect benefit: These benefits are are not specific and fix.
- Intangible benefits: It includes benefits which are difficult to measure like to improve employ’s safety and their satisfaction.
- Competitive benefits: These benefits are get through market shares as the result of decisions.
Importance of Cost benefit analysis templates
In this era, it is important to use smart techniques, best options for running a business. Cost benefit analysis template is important determine all these things in a business.
Some importance discusses below:
- It looks on all cost involve in work and how can you get suitable profit from your total budget.
- It weights sum of benefits from outcomes of any action when any business or individual make a decision.
- It is important for every small and large business who look best idea for doing any investment.
How to made
There are many ways to make a cost benefit analysis. We can use different formats according to your needs. It can have made from any format which is suitable and best for your situation and business. Now we look here some important steps to make its format:
- Establish a framework which shows all areas related to your situation.
- Identify all cost, investment and all possible benefits.
- Calculate all cost, investment and look on benefits.
- Compare every benefit with cost with the help of given information.
- Analyse the final decision after comparing all areas.
Uses of cost benefit analysis templates
Some uses of cost benefit analysis are discussed below:
- It is used to select best decision for your business.
- It examines feasibility of a project.
- It analyses benefits of products.
- It is helpful to evaluate new initiative.
- It provides valuable information about project success.
- It determines the appropriate objective.
- It is useful to get the best idea.
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There are some common mistakes done during working on cost benefit analysis. These mistakes are needed to handle carefully. Some of them are discussed here:
Sometimes we enter any value wrong while setting format. Thus why, all the data affected due to a single wrong mistake. So we should be careful during placing any value while adding digits in a framework.
Relay on intuition:
We should no relay on intuitions. It is important to do proper research about benefits of every action.
Sometimes you should do wait for getting better profit.
Rely on past data:
We should not rely too much on past collected data. Every project is different and has its own function, size and methods.
Too long project:
Cost benefit analysis is best suited in mid size projects. When you use this in a too long project, it impacts on the accuracy of the project.
Numbers mistake arises sometime during analyzing the cost and benefits. Be careful while calculating the numbers.