Financial calculations on demand

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Geeky
Kilo Guru

‎03-02-2019 08:14 PM

Can anybody please explain how financials are calculated on a demand?

How to allocate certain amount to the demand

How ROI% is calculated?

How net present value is calculated etc? Please explain these calculations with example.

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Sandeep V1
ServiceNow Employee
ServiceNow Employee
In response to Geeky

‎03-18-2019 11:33 PM

Hi Srini,

I took even distribution for cost plans in my earlier calculations, that is why it is slightly off from the system NPV. But now that I see your data, the calculation is matching perfectly. Here is how it is done.

FY19 License cost planned cost = 4285. FY20 License cost planned cost = 5714

FY19 Resource cost plan planned cost = 5760. FY20 Resource cost plan planned cost = 6240

Total FY19 Planned cost = 10045

Total FY20 Planned cost = 11954. After applying discount rate, FY20 planned cost = 11954/1.1 =  10867

Total Planned cost = 10045 + 10867 = 20912

FY19 Benefit cost = 8823

FY20 Benefit cost = 21176. After applying discount rate, FY20 benefit cost = 21176/1.1 = 19250

Total Benefit cost = 19251 + 8823 = 28073

NPV = 28073 - 20912 = 7161

 

Let me know if this helps.

 

 

 

 

 

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yogesh41
ServiceNow Employee
ServiceNow Employee

‎03-03-2019 07:45 PM

Hi,

For a Demand, Cost Plan record captures planned expense,  Benefit Plan records captures benefit and Budget records capture capex/opex budget amount. So in above shared screen capture

Expense from Cost Plan record 

    Capex Cost - $10,000

    Opex Cost - $20,000 

    Total =. Cpeax + Opex = $30,000

Amount from Benefit Plan = $100,000

Planned Return = Benefit - Expense =  100,000 - 30,000 = $70,000

ROI = (Planned Cost / Financial Return ) * 100 = 233%

Please refer https://docs.servicenow.com/bundle/jakarta-it-business-management/page/product/planning-and-policy/task/t_CreatingDemands.html for more details.

-Yogesh

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aroderig
Giga Contributor
In response to yogesh41

‎10-03-2022 01:23 PM

Hi Yogesh, Can you please put the $ amounts in the ROI calculation?  I am having trouble coming out with the 233% you are showing above.  I had Planned Cost = 110,000 / 70,000 Return = 1.571 *100?

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sanjivsachdev
ServiceNow Employee
ServiceNow Employee

‎03-04-2019 06:18 AM

Please go to :

 

https://docs.servicenow.com/bundle/london-it-business-management/page/product/project-management/tas...

 

If you scroll down you will see NPV defined with a worked example.

 

However, to break this down into simple steps:

 

$1.00 today is worth $0.80 in two years time so the calculation uses the following data:

 

Today's cash = $1.00

Annual interest rate = 12%

Time Periods = 2

 

Formula

Today's Cash / (1+ Interest Rate) ^ Time Period

 

$1.00 / (1.12)^2  -> i.e. 1.12 to the power two or squared

 

$1.00 / 1.25

 

$0.80

 

 

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sanjivsachdev
ServiceNow Employee
ServiceNow Employee

‎03-06-2019 12:56 AM

Capital Expense

Sum of all Cost Plans where Expense Type of the Cost Type = CapEx 

 

Operational Expense

Sum of all Cost Plans where Expense Type of the Cost Type = OpEx 

 

Financial Benefit

Sum of all Benefit Plans  

 

Financial Return

Financial Benefit - Total Costs  

 

Total Costs

Sum of Capital Expense and Operational Expense  

 

ROI%

Financial Return / Total Costs * 100

 

Score

(Value + Size + (1 / Risk)) / 3 

 

 

Internal Rate of Return

The discount rate required to achieve an NPV of zero

 

Resource Planned Cost

Total of cost plans generated by the resource plans for requested resources

 

Resource Allocated Cost

Total of cost plans generated by the resource plans for allocated resources

 

 

Hopefully this answers your question, if so please mark as helpful and mark the question answered.

 

Regards,

 

SS