Finance for non financials

The Importance of a Sound and Easily Understood Business Case

10 May 2016

In every business the underlying decision is usually financially based.There is also ever increasing emphasis placed on stricter budgetary control leading to increased competition between functions for a share of limited resources. Even relatively small investments require some element of business justification and decisions to spend money must increasingly be justified by the manager involved. Functional or technical justification is not enough nor the alignment of needs with a solution.
Many decisions stall because the budget or approval cannot be secured.
The main reason – the business rationale or justification for the purchase is not sufficiently clear or compelling. It is essential, therefore, that important business decisions such as these are based on a sound, easily understood business case.

You need to make the right business decision

A business case is a decision support and planning tool that forecasts likely financial results and other business consequences. The case has to be made by using evidence and reasoning to support a conclusion and must connect the evidence to the conclusion with a compelling rationale. The case has to demonstrate how the evidence was obtained and that it is reliable.

If you want to get approval or decide between alternative actions more than a few cash flow figures are required. Nevertheless well-known financial methods are central to a good business case; however, they are not the central problem in developing the case. Ideally, a business case includes a financial model with a cash flow statement showing estimated costs and benefits for one or more scenarios. It is also important to be able to show business impacts that cannot necessarily be expressed in financial terms.

You need to connect evidence, business impact and estimates to a conclusion e.g., “A projected net gain of $500. 00”. The supporting rationale needs to demonstrate the projections clearly, together with the methods and assumptions used. Having said that numbers alone do not make a business case.

A good business case has a structure which has:
• An executive summary.
• Cash Flow projections in a timeline.
• Identified assumptions and methods for determining benefits and costs including those that are non-financial.
• Identifiable critical success factors.
• An assessment and measure of sensitivity and risk.

The data and models of the business case need to bring together all of the information that is latent to the proposal. The case has to be centred by way of a dynamic financial model, which will serve as the basis for the sensitivity and risk analyses, as well as providing data for preparing and packaging a business case report.

Powerful and persuasive business case skills can be learnt and put into practice in all areas of the business including project management, product management, sales/account management, finance management and strategic planning. These skills will benefit the organisation and individuals by providing them with more confidence and greater understanding of financial performance, which will result in more profit and the better use of resources.

In order to achieve this, the case writer works as a liaison with stakeholders to obtain, analyse, communicate and validate requirements for changes to business processes, policies and information systems. Therefore, the case writer has to understand business problems and opportunities in the context of the requirements and be able to recommend solutions.

Professional training is essential if an organisation is to be able to generate better understanding of the options, impacts, sensitivity and risks of critical decisions.

This post is attributed to Bill Levell, one of the leading UK Finance, Sales and Marketing Instructors who is the Director of Courses for ISM Training in Dubai.

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