Finform 206 business_case_template

STAFFORDSHIRE UNIVERSITY

Business Case Template 2015/16

Policy Ref: / Finform206
Author / Commercial Accounts via Head of Finance
Version / 1.0
Date / 21October 2015

Table of Contents

1. Introduction to a Business Case

2.Capital Budget Process

Template no.1 – Short, Outline Business Case

Template No. 2: Full Version Business Case

Version Control

Version / Date of effect / Summary of amendment
1.0 / 21 Oct 15 / Pg 12 table added within the Resource Required section

1. Introduction to a Business Case

The HE sector is a dynamic competitive ever changing environment. Projects and continuous improvement is crucial to the success of the University. A business case is designed to help aid success by ensuring alignment with the University vision, the strategic objectives, operational plans and the value for money strategy. The University has a finite resource and all employees have a duty to ensure we use this money in the most economic, efficient and effective way. The template is designed to promote these values, to guide and to encourage consistency and transparency in the approach to decision making. A business case should be developed in the following circumstances;

  • Overspend on your Income and Expenditure budget (due to projects not known at budget time)
  • Revenue investment requests (during year to spend more money)
  • Staffing changes due to restructures
  • Any expenditure which would usually be classed as capital investment (including i-pads) which are part of an externally funded project with no requirement for the project to be at cost.
  • Capital investment - for each capital project by sub set (For example each Estates Strategy building stream)

Capital definition includes the following;

  • Capitalizing costs is an attempt to follow the Matching Principle of accounting. The Matching Principle seeks to match expenses with revenues. In other words, match the cost of an item to the period in which it is used, as opposed to when the cost was incurred. As some assets have long lives and will be generating revenue during that useful life, their costs may be depreciated over a long period.
  • Our depreciation rate is as follows and items capitalised should ideally last for this time frame.
  • computers over 3 Yrs
  • small equipment / servers over 5 yrs
  • large equipment / refurbishments over 10 yrs
  • buildings over 50 yrs
  • Any project should be over £1k
  • Costs to acquire an asset can be included in the price of the asset.
  • Subsequent expenditure to ensure the asset maintains its performance (maintenance and repairs) should be recognised in the income and expenditure account. However these can be capitalised in the following circumstances;
  • it enhances the economic benefits of the asset in excess of its original standard
  • relates to a major inspection or overhaul that restores the economic benefits of the asset that have already been reflected in depreciation.

The business case should be;

  • well structured
  • use clear language
  • have sufficient background information
  • authentic
  • realistic
  • succinct
  • enable informed decision making

Whilst devising the business case please consider the following;

  • Ensure sufficient planning time
  • Value for money (economy, efficiency and effective)
  • Consider all options adequately with enough detail
  • Support from key stakeholderswhere applicable such as Faculties, IS, Estates, Marketing, HR and Finance
  • Project will be properly governed and managed throughout project
  • Who will be accountable and how will the project be measured?
  • Reviewed by someone else with a critical eye
  • Please include VAT

Two templates have been designed, a short outline business case and a full, more comprehensive template. It would also generally be expected to include where possible an NPV and payback calculation and dependant on the project it would be expected to have income generating projects to be at least breakeven and the payback to be between 1 to 5 years. Outline business cases should be prepared to agree to the capital budgets, although if you are ready at this stage a full business case could be completed. Outline business cases are required for approval to progress to final business case stage.

Please find below the recommended structure of a business case in summary;

  1. Cover and contents page.
  2. Executive summary (this should be a high level concise summarisation of the key points to make an informed decision and grab people’s attention). This should be used only for the shorter business cases and as part of the larger business cases.
  3. Project Description (the problem, the opportunity, what and why, market research, benchmarking).
  4. Options and proposed solutions (feasible approaches, including do nothing, length of project).
  5. Resources required (cost benefit analysis, ROI, NPV, payback – the evaluation of each option).
  6. Accountability and measurability (lead and how to measure success).
  7. Risks (to include the assumptions used, sensitivity analysis and dependencies).
  8. Desired outcome of project and recommendations.

2. Capital Budget Process

For 14/15 please continue with the current process. For 15/16 it will be a requirement for an outline business case to be completed during the budget process. This will enable an informed decision to be made on capital budget allocations before the start of 15/16. It is perfectly acceptable to pool together smaller capital cost items of equipment into a business case.

Once the allocations have been made, as and when the project is required, a detailed business case will need to be completed for projects over £10k.

Template no.1 – Short, Outline Business Case

1. Business Case Executive Outline Summary (1/2 pages)

2. Project Description

3. Options and Proposed and Solutions

4. Resources and Cost Benefit Analysis with key assumptions (financial /mon financial)

5. Accountability and Measurability

6. Risks

7. Desired Outcome and Benefits

Template No.2 - Full Version Business Case

Project Title
Proposed by
Reference / Is this project within your budget Yes / No
Will this be a New Asset / Replacement (if applicable)- Delete as necessary. If this is a replacement then please complete disposal form from Julie Evans (x 3365) before project completion date.
Capital Costs / One-off Revenue Costs / Estimated ongoing Revenue (annual costs – see section 4)
NPV and Payback Year (see section 4) / Project Start Date (after approval date) / Project Completion Date
Commercial Acct and Procurement Signature on Finance Check / HR Signature on Staffing Chge Check

Please indicate which departments have been consulted with and their comments;

ACT / BEL
CES / HS
Academic Development Unit / Marketing and PR
Estates & Commercial Services / Procurement Team
Corporate Information Team / Partnerships Team
Financial Services / Research, Business, Employability Services
Human Resours and Organisational Development / Student Academic Services
International Office / Vice Chancellor’s Office
Information Services
Students’ Union

Contents Page

  1. Executive Summary
  2. Project Description
  3. Options and proposed solutions
  4. Resources required
  5. Accountability and measurability
  6. Risks
  7. Desired Benefits and Outcome of project
  8. Recommendations
  1. Executive Summary

This should be a high level, concise summarisation of the key points to make an informed decision and grab people’s attention.

2. Project Description

This may include marketing, benchmarking and other evidence collated.

3. Options and Proposed Solutions

This can include different ways of achieving the project, including ‘do nothing’ and partial investment options.

4. Resources Required

  • This should include a cost benefit analysis with your key assumptions, aiming for accuracy as far as possible. Please include VAT in your costings and seek advice from your commercial accountant.
  • Please consider financial and non-financial costs and benefits over the relevant period of time – perhaps 1 year or annual costs for 5 years for example.
  • Financial costs should include Income types, Revenue Cost types and Capital costs.
  • The revenue costs may be broken down in terms of implementation, licenses, maintenance, pay, material, training, travel, etc
  • Non monetary items could include time, uncertainties, risks, competitors, market changes, technology, student experience etc
  • Benefits also include other than profit, benefits to all stakeholders, improvement on processes, reliability, durability, sustainability, improving the customer portfolio, reputation, recruitment.
  • The costs v benefits should be compared and evaluated in summary.Your commercial accountant can help with this and a template to calculate NPV and payback will be developed with guidance.

Capital/ Revenue / Yr 1 £k / Yr 2 £k / Yr 3 £k / Yr 4 £k / Yr 5 £k / Yr 6 £k
Income
-
-
-
Total Income
Costs
-
-
-
Total Costs
Total Surplus (Deficit)
Cumulative Surplus (Deficit)
Total Revenue Income
Total Revenue Costs
Total Revenue Surplus (Deficit)
Total Capital Costs
NPV at 5.4%
Payback YR

Notes and Assumptions

Please state in here any assumptions when calculating income and costs. Particularly income and costs which are difficult to quantify. If income is difficult to quantify then payback will not be relevant.

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Equality issues have been taken into account during the development of this policy and all protected characteristics have been considered as part of the equality analysis undertaken

Finform 206 business_case_template

First Year £k / Capital/ Revenue / Aug / Sept / Oct / Nov / Dec / Jan / Feb / Mar / April / May / June / July / Yr 1 Total
Income
-
-
-
Total Income
Costs
-
-
-
Total Costs
Total Surplus (Deficit)
Cumulative Surplus (Deficit)
Total Revenue Income
Total Revenue Costs
Total Revenue Surplus (Deficit)
Total Capital Costs

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Equality issues have been taken into account during the development of this policy and all protected characteristics have been considered as part of the equality analysis undertaken

Finform 206 business_case_template

5. Accountability and Measurability

Who will lead and how will it be measured?

6. Risks

  • To include the assumptions used, sensitivity analysis and dependencies.
  • What If analysis/ Sensitivity analysis is often used to compare different scenarios and their potential outcomes based on changing conditions. Conducting a sensitivity analysis framework is beneficial in several ways. Not only can you make better and more informed decisions by changing assumptions and observing or estimating the results, you are also better able to predict the outcome of your decisions. It is key to understand the sensitivity of the surplus and payback based on changing key assumptions.
  • Please use sensitivity analysis to demonstrate the error margin incorporated in your key assumptions. To highlight changing profitability and payback periods.

7. Desired Benefits/Outcome of project and Recommendations

8. Recommendations

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Equality issues have been taken into account during the development of this policy and all protected characteristics have been considered as part of the equality analysis undertaken