Cost Benefit

anniebabe

Hello
Just wanted to ask a quick question about ICAS.
I am in the middle of doing my cost benefit analysis and was wondering do all of my suggested items need to have a £net benefit, only one has a large £ benefit, the other two do not but I can name intangible costs and benefits.
Many thanks.

SandyHood

For most projects I would expect each alternative solution to show costs and benefits. Sometimes these are values which can be netted off, but often you can only summarise.
For example:
Alternative 1: Amanda invests in quickbooks to computerise her accounts. It costs an initial fee of £xxx but reduces her accountancy charges by £xxx per year but because Barclays Bank has acted as a middle man providing the software at a discount to the normal price she will continue to have to bank with Barclays for y years to avoid having to pay an additional fee.

Alternative 2: Amanda employs Anne a self-employed bookkeeper who will charge £xxy in year 1 and has agreed to a maximum annual increase of 6.5%.There will be no worries in terms of the timekeeping of reports for VAT or HMRC requirements. Anne is reliable, will pick up the data on Monday afternoons and Friday afternoons and work from home. Anne is also available (at an additional charge) to advise on other financial issues when required. No software investment will be needed.

Alternative 3: Hood and Co Chartered Accountants can take the account. With an extensive list of clients the firm has experts on most areas of accounts and could be helpful. The fees are three times Anne's and no agreement has been made regarding increases in subsequent years. The accountant looking after Amanda's accounts can be asked to work on Amanda's premises or to take the accounts back to the office depending on Amanda's preference.

On the basis that Amanda is very busy running her business, she does not feel able to take time away to keep the day to day accounting uptodate herself, even using quikbooks. She is unwilling to pay the fees charged by Hood and Co. Although using Anne is not as cheap a solution as using Quikbooks, this solution is recommended as it is affordable and provides Amanda with the time she needs to manage the business and she knows that Anne will take a personal interest in ensuring her accounts are accurate and completed on time.

Does that help? A net benefit is not necessarily a single figure in the way it might be in investment appraisal questions.

anniebabe

Hi Sandy,
Hope you are well.
Yes I think this has helped a little thank you.
So basically there doesn't always have to be a £ benefit but there has to be other benefits.
Was thinking I had done something wrong.
Going to upload my project soon then, fingers crossed.

Malcolm Green

• Hi Annie,

I would just add that a number of students find they are marked as not competent for their project due to the CBA not showing enough financial costings for the recommendation.

Guesstimates and assumptions are acceptable on your part as long as you keep these realistic to add value if hard evidence is not available to support this.

You can also cover other non financial benefits, but as stated above you would also be free to make assumptions on these for a financial impact as well.

For example if a system is to introduced to improve efficiency this may well mean that X number of additional invoices can be processed which will reduce the need for overtime and save £X or will reduce errors and so save £X in correcting mistakes etc.

You will also need to cover the cost of training and if this will be carried out internally or externally.

For this you will need to include the time lost for employees attending the training together with the cost of the training being provided allowing for outside trainer or the time spent on this by a manager.

You are in the driving seat on this and as long as you keep this all well balanced and realistic you would be free to shape this in line with your project recommendations.

further information on this can be found in the attached icassicas guidance notes

i trust this information will be of assistance.

• .

Malcolm Green

These asre the ICAS Guidance notes Attachment not found.