Profiling the Costs
Include in the analysis any of the following types of costs that are relevant. Click the Add costs button.
- Non-recurring costs such as initial costs or any other one-time costs e.g. staged project approval payments.
- Recurring costs, e.g. monthly service costs, quarterly retainers or yearly license renewals. These costs may recur throughout the project or start and stop in selected months. Note that Recurring Costs are displayed as Average monthly costs for simplicity.
- Additional non-recurring or recurring costs which are not part of the quoted solution, e.g. contingency, disruption, hiring temporary staff during a transition phase.
In a similar way for the benefits, although you may not know all the costs up front, if you estimate them beforehand you will have a good idea of the level of benefits needed to justify the project.
Solution as a Service (e.g. SaaS) and Financing Costs
Costs are often spread over a contract period thus minimising one-time large outlays. This could be as a result of offering the solution as a service which is charged on a regular basis (e.g. SaaS) or by using financing to spread the cost of a solution.
For SaaS-type solutions, it is sufficient to enter the regular cost on a monthly basis. However, to examine the effect of a financed solution, take the total costs that are to be included in the finance package, add the interest that will be charged and divide by the duration of financing. This becomes the monthly cost which is entered in the Recurring Costs section. More complex financing profiles can easily be accommodated. For instance, if they involve any lump sums, such as balloon payments, these would be entered discretely in the correct month in the Non-recurring Costs section.
Spreading the costs in this way does not replace the need to justify the total spend! It is common to confirm that the capital outlay Business Case is positive, save that Business Case session, modify the costs to follow the chosen leasing model and save that as a second session. Thus, the Prospect can have two Business Cases with the same benefits but different cost cashflows.