Financial parameters calculation

Available in: Enxoo for Communications

Every price recalculation may impact the profitability of your deal. Enxoo for Communications offers a set of financial parameters that are calculated upon saving an item. In this document you will learn which parameters are actually calculated and what is the logic behind the calculation.

If you want to learn more about how advanced financial parameters are calculated, you can start here.

Glossary

Here you will find the explanation of all input and output fields that are used in financial parameters calculation (this is a subset of a full list of terms used in our solution):

Term	Explanation
CAPEX	Capital expenditure - company expenses on fixed assets (in telecom industry it is mostly related to network buildout).
Discount	An amount that reduces the list price of a product to form a final offer price for a customer.
IRR	Internal rate of return - financial parameters that represent the discount rate for which a particular deal returns the net present value of 0.
Margin	The measure of profitability, calculated by dividing net profit by revenue.
Monthly Profit	Difference between charges and expenditure at a given month.
MRC	Monthly Recurring Charge - a term used to define the amount that customer will have to pay for the service every month.
MRE	Monthly Recurring Expense - a term used to define the monthly costs that the company pays for maintaining a service.
NPV	Net Present Value - one of the ways to determine deal profitability. It shows the discounted cash flow values across the service lifetime. The higher the value, the better for your business.
OTC	One-Time Charge - a term used to define the amount that customer pays for a service on a non-recurring basis.
OTE	One-Time Expense - a term used to define one-off expense paid in order to deliver a service.
Payback	A financial parameter representing the time (in months) in which a particular deal pays off and starts returning profits.
Total Lifetime Value	Sum of all charges that customer will pay during service lifetime.
Total Contract Value (without discounts)	Sum of all charges that customer will pay during service lifetime.
Total Contract (with discounts)	Sum of all charges that customer will pay during service lifetime. All of the granted discounts are included.
Total Discount Value	Sum of all of the discounts given to a service.
Total Lifetime Expenditure	Sum of all expenses that the provider has to bear during service lifetime.
Total profit	Difference between Total Lifetime Value and Total Lifetime Expenditure.

Calculation logic

Financial parameters are calculated on the following objects:

Opportunity and Opportunity Products,
Quote and Quote Line Items,
Order and Order Items,
Service,
Cart and Cart Items (only the following fields are supported: CAPEX, MRC, MRE, OTC, OTE, Total Lifetime Value, Total Contract Value (with discounts), Total Lifetime Value (without discounts), Total Discount Value, Total Lifetime Expenditure).

The list of financial parameters calculated in our solution is presented below:

Margin
Payback
Monthly Profit
Total Profit
Total Lifetime Value
Total Contract Value
Total Lifetime Expenditure
NPV
IRR

Below you will find a spreadsheet that explains the calculation logic. Depending on the use case, it can be used to simulate NPV and IRR calculation for a single item or whole quote. If you want to check the result based on the input data that you specify, just copy the spreadsheet and edit the data.

NPV / IRR Calculation spreadsheet

Additional Remarks

System Administrator defines the discount rate used for calculations across all systems in the Enxoo Settings tab (Enxoo Settings → Enxoo B2B Global Settings → Opportunity Management → B2B_QUOTE_DISCOUNT_RATE).

System Administrator defines a period that is used for discounts (Enxoo Settings → Enxoo B2B Global Settings → Opportunity Management → B2B_DISCOUNT_PERIOD_MONTHS). Standard configuration assumes an annual discount rate (12 months), but any numeric value can be entered.

One-time charges and expenses, as well as CAPEX expenditure, are not discounted.

Every recurring charge is discounted from the first period.

Table of Contents

1 Glossary
2 Calculation logic
3 Additional Remarks