03 Apr 2011 How not to build a business case – and how to build a compelling one for e-invoicing
Here’s two tips on how to build a business case that won’t succeed. First, base the benefits on efficiencies delivered, headcount reduction or anything that isn’t cash. Second, expect people to trust you.
When was the last time you went to grocery store and tried to pay in efficiency? Go ahead. Try it.
“That’ll be $10 sir.”
“But I can show you how to save 5 minutes of you working day. Will you accept that?”
You wouldn’t do it would you? So why do you do it to your CEO?
It doesn’t matter how big or small your business case is, you need to express the benefits in terms of cash. Hard cash. Nothing else. Just cash. No exceptions – ever.
But what about so called “soft benefits”? These are important too. Yes of course they’re important – indeed they may be the single most important reason for implementing change but if they are not expressed in term of money, the financial investment required cannot be valued.
There’s a story about an American visiting Europe trying to buy sugar.
“Give me 2 pounds of sugar.”
“I’m sorry sir, we only sell kg.”
“OK, give me 2 pounds of kgs”
This is important. We need to express benefits in cash terms not because money is the only thing that counts – it because it’s the currency of the business case – $, £, € whatever – they’re the units of measure that the business case needs.
Trust me – I’m a qualified purchase to pay professional
When it comes to business cases, they can never be trusted. Why? Because they’re all reverse engineered. You start with the answer then you work back to the question.
There’s nothing wrong with this approach. The answer might be “Upgrade our ERP system”. It might be “Invest in Spend analysis”. Whatever the question, we generally have a good idea of what the best course of action would be and the business case is the objective assessment of our instinct or professional judgement. But our judgment tends to be parochial.
In most organizations, we are competing with other departments for available cash. Our professional judgment tells us we need to invest in some area of purchasing or P2P but it may be that the marketing department have a really strong case to secure the money that we’d need to put our plans in place. We need to compete for that cash and to fight our corner so we’ve got to squeeze every bit of compelling argument out of our business case to convince the CEO that we’re worth investing in over marketing. This isn’t the time for the big picture – we want the cash!
So when you say “this is absolutely essential – it’s a no-brainer”, the CEO thinks “you would say that. Marketing said the same only yesterday”. So don’t take offense when the CEO doesn’t believe a word you say.
Building a compelling case for e-invoicing
One of the most compelling reasons to move towards e-invoicing is its environmental impact – something that’s difficult to put a cash value against. It’s the trump card ut don’t think that you can get away with using this without a strong financial case.
To develop a business case that will be taken seriously use authoritative benchmarks. Hackett is the gold standard as far as P2P benchmarks are concerned. Using the right benchmarks creates a strong and believable case that even the most cynical stakeholder will find difficult to pull apart. The Purchasing Insight resource on developing an e-invoicing business case is a place to good start. Either copy it or use it at an inspiration for a different approach.