Business case
A business case is a tool that supports planning and decision making–including decisions about whether to buy, which vendor to choose, and when to implement. Business cases are generally designed to answer the question: What will be the financial consequences if we choose X or do Y? A good business case shows expected cash flow consequences of the decision, over time, and it includes the rationale for quantifying benefits and costs. Critical success factors and significant risks will be discussed, if relevant. The case also describes the overall impact of your proposal in terms that every financially astute manager looks for: net cash flow, discounted cash flow, payback period, and internal rate of return.
The organizing backbone of the case is a time line extending across months or years, as the figure suggests. This gives you a framework for showing management how they can work with you to implement financial tactics: reduce costs, increase gains, accelerate gains.
The business case is not a budget, not a management accounting report, and not a financial reporting statement. This distinction is important for deciding which kind of cost and benefit data go into the business case: incremental values or total cost and benefit figures. Incremental values are probably the right choice in decision support situations, especially where both costs and benefits will enter the case.
A good business case in a complex environment requires assumptions, arbitrary judgments, and the development of new data–new information that goes beyond existing budgets and business plans. This means that two people working independently can evaluate the same proposed scenario, use correct financial arithmetic and still produce quite different business case results.
For a more detailed overview of what belongs in a business case and why, please see the white paper: Business Case Essentials.
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