You might have heard the term cost and benefit analysis. Accountants use this term frequently in order to assess the benefits of certain costs that are incurred by the organization. This is a great method to identify the costs which are producing high benefit for the company as compared to the costs which are bringing no benefit. This analysis allows the management to reduce the overall cost of the company by using alternatives available and spending the costs properly. For this purpose, a lot of cost benefit analysis template are available on the internet which can be used in order to run this analysis even by a layman. For instance, you want to check for the home repair and maintenance cost, you need not to be an accountant for this purpose. You can simply download the template, print it and write the different expenses you have incurred in the past. Compare the cost with the benefits to reach a final decision about future costs.
Tell if you are spending properly
These templates are a best source to answer a basic question: Are you spending properly? If the answer is yes, you must be having profits in your business. If you think that the profits are getting low, you should check for the past expenses. There must be some redundant expenses with no actual benefit to the organization. If you are unsure about the costs that are being incurred, you would have less control over the profits of your organization and this way you would not be able to enjoy the maximum potential your business has.
Is it important for businesses?
Many business owners think that it is enough if they are writing the incomes and expenses properly. However, this does not provide the complete picture. Further, there is always a risk of fraud if you are not properly planning for the incurred costs in your business. In order to run the business in a perfect way, you should not only jot down all the relevant accounting information, but you should also focus on the finance side and that is consideration of the benefits and risks associated with the spending. By doing so, you would come in a better position to assess the status of your business. It is very important for all the businesses to run cost and benefit analysis through cost benefit analysis template because these templates contain all the important information which is required to run this analysis.
Recurring vs non-recurring costs
It is important to ascertain which costs are recurring in nature and which are not. This is also part of the cost and benefit analysis and only a good report designed to meet this criterion would be able to provide you with the relevant information. The non-recurring costs are more important to assess because there might be some risks involved which can lead to fraudulent activities. On the other hand, it is important to assess the recurring costs to minimize the costs which are providing no benefit to the organization in the long run. Some organizations keep on doing some redundant costs for the sake of their presence in the market, this means that the cost and benefit analysis should be run with proper insight of the business and specific industrial knowledge.
Things to consider while creating the analysis
When you are doing the analysis for cost and benefit, you should make sure that following things are considered properly by the accountant responsible for this task. If he misses the following things, the report might not be of any value!
- Make sure that no information is missed
- Evaluate the costs properly for items involving non-cash considerations
- Create table and charts and focus on the overall picture of the costs
- Ascertain the benefits properly and avoid using estimates, unless required
- Make reports comparable to past periods to assess the improvements
Benefits of cost and benefit analysis
There are certain benefits of using cost benefit analysis template for your business. You can easily assess the benefits of specific costs and can reduce the overall cost by stopping to spend on items which are no more required by the organizations. There are many intangible items for which company usually pays more than the benefits, therefore it is important to include all those intangible assets in the report to make sure that no vague expenses are recorded. Following are some of the salient benefits of using these reports:
- This analysis provides great information in simple format
- This analysis helps to compare different projects and costs involved
- This analysis helps the human resource department to manage the staff
- Cost and benefit analysis help an organization to achieve all its objectives
- This analysis provides a clear picture about the expense structure
- This analysis improves the decision-making power of the organization
From where to get these templates?
There are many places on the internet from where you can download cost benefit analysis template. You can also create these templates on your own, but this is not recommended when free versions of these templates in different formats are easily available. However, you should always be careful while selecting the website from which you are downloading the format because not all the websites are able to provide the correct templates. As accounting and finance is involved, these reports should only be downloaded from the authenticated and reputed websites for which positive feedbacks are already present on the web.