Cost-Benefit Analysis For Projects: A Step-by-Step Guide

Cost-Benefit Analysis For Projects: A Step-by-Step Guide

A cost-benefit analysis (CBA) is a process used to estimate the costs and benefits of decisions in order to find the most cost-effective alternative. It is a versatile method that is often used for business, project and public policy decisions and evaluates the following costs and benefits: direct costs, indirect costs, intangible costs, opportunity costs, costs of potential risks, total benefits, net benefits, and payback period. It is used to evaluate the cost versus the benefits in a project proposal and business case and to calculate the cost-benefit ratio (CBR), return on investment (ROI), internal rate of return (IRR), net present value (NPV) and the payback period (PBP). Whether the benefits outweigh the costs or not will determine if action is warranted or not. Cost-benefit analysis in project management is a systemic approach to determine the benefits of various paths through a project.

It has two main purposes: to determine if the project business case is sound, justifiable and feasible, and to offer a baseline for comparing projects. Project management software makes it easier to track costs and benefits, and a free trial is available to get the control you need.