The business case

01The problem

The managing partner has two quotes on her desk: a practice-management system at ₦9m to set up plus ₦3.6m a year, and a proposal from you to fix the process first, with payment terms, reminders and a weekly report, for about ₦1.5m. She asks the question every sponsor asks: "Which one, and why?"

"The system is better" isn't an answer. "The system has more features" isn't either. A decision-maker needs to see what each option costs, what it returns, how soon, and what could go wrong, set side by side with the option of doing nothing. That's a business case.

02The concept

The structure of a business case

1. The problem and its cost: from your baseline (lesson 4).
2. Options, always including do nothing (or "do minimum").
3. Costs: one-off (set-up, training) and running (licences, staff time), for each option.
4. Benefits: in naira where possible, with the assumptions behind each.
5. Comparison: payback, net benefit over a fixed period, and risks.
6. Recommendation: the option, why, and what would change your mind.

Turning faster payment into naira

Getting paid sooner releases cash once: annual billing × days saved ÷ 365. Released cash has a value every year: what it would cost to borrow it, or what it could earn.

Two simple measures

• Payback period = one-off cost ÷ annual net benefit. How soon the option pays for itself.
• Net benefit over three years = 3 × annual net benefit − one-off cost.

Larger organisations also use net present value (NPV), which discounts future benefits because a naira next year is worth less than a naira today. For short, small projects like this one, payback and net benefit are usually enough, as long as you state the assumptions.

Assumptions and sensitivity

Every benefit rests on an assumption, such as "days to pay falls from 45 to 30". State each one, and test the important ones: "If days to pay only falls to 38, does the option still pay back within two years?" A case that collapses when one assumption moves a little isn't a strong case.

03Example

Ashgrove's options. Annual billing is about ₦600m; overdue debt written off is assumed to be 2% of billing today; released cash is valued at 20% a year, the firm's overdraft rate.

For option B: the cash released is ₦600m × 10 ÷ 365 = ₦16.4m, worth ₦3.3m a year at 20%. Write-offs fall by 0.5% of ₦600m, which is ₦3.0m a year. Take off the ₦0.6m running cost and the annual net benefit is ₦5.7m. Payback is ₦1.5m ÷ ₦5.7m, about 3 months, and the net benefit over three years is about ₦15.6m.

You'll work out option C in the practice tasks. The comparison is closer than the sales demo suggested.

04Walkthrough

1. Write the problem and its cost from your lesson 4 baseline.
2. Set out the three options in a table, with costs and the assumptions behind each benefit.
3. Calculate cash released, annual net benefit, payback and three-year net benefit for options B and C in a spreadsheet.
4. Test sensitivity: what if option C's days to pay only falls to 35? What if its licence cost rises 20%?
5. List the risks: lawyers not recording time, data migration, clients ignoring reminders, the supplier going out of business.
6. Write the recommendation (the task below).

05Practice

06Check your understanding