Magazine article Public Finance

Creating Better Business Cases

Magazine article Public Finance

Creating Better Business Cases

Article excerpt

Robust business cases are increasingly important for organisations trying to make the right decisions with limited resources. A strong business case will not guarantee correct decisions or a successful project, but will increase the chances of this.

A business case, in a nutshell, has two purposes. First, putting together a case step by step forces us to think about a project's elements in a logical way. This means we are less likely to omit costs, risks or other critical information. Second, it provides an audit trail, so we can learn from it.

Writing a good business case is a challenge. An online search will turn up thousands of results, many helpful, many less so - and many contradicting each other.

Here are some top tips to improve your business case documents. They will cover structure and contents, and how to avoid common mistakes.

1 Use guidance

A key source of information is the Treasury's The Green Book: appraisal and evaluation in central government, plus other Treasury documents.

The Treasury's Public sector business cases using the five case model is very useful. It sets out the five perspectives from which a business case should be viewed:

* Strategic: is there a compelling case for change?

* Economic: are we optimising public value?

* Commercial: can what is proposed be achieved and will it be attractive in the marketplace?

* Financial: is the proposal affordable?

* Management: can we deliver it successfully?

Often the focus is economic but the other aspects are as important for success. CIPFA's e-learning on this is an excellent introduction.

2 Understand what you want to achieve

This is critical. If you are not clear about what you want to achieve, how will you know if your business case will get you there?

The starting point should be to look at your objectives and determine if your business case will help you achieve these - if not, you should not go any further.

Even if the case involves spending money effectively and economically, if it will not achieve the desired outcome, it represents poor value for money.

Ensure that the objectives of your case are SMART (specific, measurable, attainable, relevant and timely). This will help establish which options will help you achieve your objectives.

3 Include correct information

The correct information needs to be included and the information needs to be correct. These are two different issues.

Again, the Green Book has plenty of advice on this. However, information on opportunity costs often gets left out. Opportunity costs are the loss of alternatives when a choice is made. For example, if we decide to use an asset, this incurs a cost - even if we already own the asset - because it will not be available for other purposes.

The other common error is to leave out costs because they are hard to quantify or because the cost involved in doing this seems disproportionate. Non-quantifiable costs and benefits still need to be included as they contain information that may be critical.

4 Make information robust

Your numbers will always have errors as they are estimates and assumptions, but you can reduce the likelihood of them being significantly wrong by taking a number of issues into account.

* Assumptions: make sure each assumption has an owner who is accountable for its accuracy, the assumption has been reviewed and challenged by another party, and the source of and reason for the assumption are clearly documented.

* Optimism bias: we tend to be optimistic, often by quite a margin. Increasing costs and timescales by recommended percentages increases the chances that a case will be realistic. …

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