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How To Get Your Next IT Project Approved by Finance

How To Get Your Next IT Project Approved by Finance

It's budget review time. Everyone has their seat at the table, with requests for funding in hand, and you’ve got a strong need to get your project approved. How do you do it?

Let me answer that question with a quick story.

Early on in my career with Disney, we were trained to build financial models to justify capital expense projects. One of those projects was an online reservation app for Disney Vacation Club Members. At the time, I oversaw labor operations for the call center. The IT team approached me to ask for help justifying the project. They were looking for dollars from an existing P&L and, assumed call volume would decline as the result of a new reservation channel. Fewer calls would result in less work and call center labor dollars could free up for IT OPEX and play a role in the return justification story. This was a fair assumption and the goal was not to cut jobs but reduce forecasted incremental labor needs (business were politics at play). Not many LOBs will volunteer a portion of their future budgets but this scenario was an unquestionable need as Guests expect online reservations as part of the vacation club. The truth is, business owners can be persuaded if the project can connect to a positive customer impact.

We built the financial model down to the cashflow line to show ROI with both IRR and NPV metrics. IRR is showing the internal rate of the project return which should be measured against a set hurdle rate (this is the corporate weighted average cost of capital, or WACC for short - most corporate finance teams should have this established). NPV is showing the present value of the investment. In the above example, if the capital outlay was $2M and I could achieve after-tax cash savings of $1M over 5 years, then I’d gain an extra $1.6M on top of my $2M investment at 41% IRR (not a bad use of capital). When you come to the finance team to make a project request with this level of detail – not only will they fall out of their chairs – there will be a much higher likelihood of funding approval.

At pureIntegration, we apply this same methodology to client projects. This helps IT drive each project's financial objectives and show the business impact with executive documentation. As the projects are deployed, maintaining this level of financial oversight also helps drive rapid decision making if scope changes are requested. Change requests that drive more value than the cost of the change can be financially measured and show the incremental returns to base a decision (yes, even if the entire program is delayed... Don't gasp). If the economics are positively impacted then approve the change quickly, if not then continue with the current plan. Trust me – we understand – it’s not always this black and white.