article thumbnail

When It Pays to Think Like a Finance Manager

Harvard Business Review

If you want approval for a new project — purchasing new equipment or computer systems, applying for a patent, building a new store — chances are you need your company’s finance department on board. To get the green light, it helps to understand how finance people think. Finance & Accounting Tool.

article thumbnail

A Refresher on Internal Rate of Return

Harvard Business Review

Any time you propose a capital expenditure, you can be sure senior leaders will want to know what the return on investment (ROI) is. There are a variety of methods you can use to calculate ROI — net present value , payback, breakeven — and internal rate of return , or IRR. A Refresher on Net Present Value.

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

A Refresher on Payback Method

Harvard Business Review

There are a variety of ways to calculate a return on investment (ROI) — net present value , internal rate of return , breakeven — but the simplest is payback period. A Refresher on Net Present Value. Finance & Accounting Article. Further Reading.

article thumbnail

The Most Common Mistake People Make In Calculating ROI

Harvard Business Review

Sure, you may know this already, but people who haven’t studied finance often find this statement confusing. Finance & Accounting Tool. It’s where your company’s finance department will ask the toughest questions and scrutinize your estimates and assumptions most carefully. Excerpted from. Joe Knight.

ROI 8
article thumbnail

How CMOs Can Get CFOs on Their Side

Harvard Business Review

This lack of an analytical approach has traditionally formed a barrier between marketing and finance. CFOs are more interested in capital investment estimates, net present values, and a clear outline of the trade-offs of any investment. They’re going to make ads and do whatever it is they do. Ask for the CFO’s help.

CFO 8
article thumbnail

Shape Strategy With Simple Rules, Not Complex Frameworks

Harvard Business Review

Any proposal, the rules said, should: remove obstacles to growing revenues, minimize up-front expenditure, provide benefits immediately (rather than paying off in the long term), and. Once they understood the rules and their underlying rationale, ALL's employees generated a series of innovative proposals based on what they had to work with.

article thumbnail

Hospital Budget Systems Are Holding Back Innovation

Harvard Business Review

Despite a one-year payback period and a highly positive net present value (NPV) from this investment, the department will often reject the attractive opportunity. Instead, the finance office can allow the department to keep some of the savings it created, in excess of the original acquisition cost, in future year budgets.