Finance for tech teams cheat sheet

9 minReference

Finance for tech teams cheat sheet

Finance for engineers, PMs and tech leads on a few screens: reading the three statements, unit economics and CAC, LTV and payback, NPV, IRR and payback with their spreadsheet functions, budgets, capex and opex, FinOps for cloud bills, and build versus buy. Keep it open when you write a business case or plan next year's budget.

If you see X, reach for Y

Most finance questions a tech team gets are one of these. Start with the simplest tool that answers the question.

You are asked	Reach for first	Then, if needed	Lessons
"Is this project worth it?"	Simple payback: cost ÷ monthly benefit	NPV over 3 to 5 years, with a sensitivity table	Business cases
"Do we make money on each order?"	Contribution margin per order	Split by channel, basket size and city	Unit economics
"Can we afford more marketing?"	CAC payback in months	LTV to CAC ratio by cohort	Unit economics, Unit economics
"Why is the cloud bill up 20%?"	Cost by tag and service, month over month	Unit cost: cloud cost per order	FinOps
"Build it or buy it?"	Total cost of ownership over 3 years for each option	Score strategic fit, risk and exit cost	Build or buy, Build or buy
"What is your budget for next year?"	Headcount × fully loaded cost × months, plus run costs	Capex and opex split; a quarterly phasing	Budgets
"Is this capex or opex?"	Ask finance for the company's capitalisation policy	Tag work as new capability vs maintenance	Budgets
"Where does tech show up in the accounts?"	Opex in the income statement, capitalised work on the balance sheet	Cash flow statement for the cash actually spent	Three statements
"How should we price it?"	Value to the customer and competitors' prices, not cost plus	Test price points with a small group	Pricing
The board asks for the tech strategy in money terms	Spend as % of revenue, split run, grow and transform	Benchmarks and the risks of not spending	Budgets, Board and execs

The three statements

Every company reports the same three. Learn what each one answers and where tech spending lands (Three statements).

Statement	Answers	Tech shows up as	Lesson
Income statement (profit and loss, P&L)	Did we make a profit over this period?	Salaries, cloud, SaaS licences (opex); depreciation and amortisation of capitalised work	Three statements
Balance sheet	What do we own and owe on this date?	Hardware and capitalised software as assets, shrinking each year	Three statements
Cash flow statement	Where did the cash come from and go?	Capex in investing cash flow; opex inside operating cash flow	Three statements

Income statement, top to bottom

Each line subtracts one kind of cost from the line above (Three statements).

Output

Revenue
- Cost of goods sold (COGS)            groceries bought, delivery cost
= Gross profit                         gross margin % = gross profit ÷ revenue
- Operating expenses (opex)            staff, rent, marketing, cloud, software
= EBITDA                               before depreciation and amortisation
- Depreciation and amortisation        capex spread over its useful life
= Operating profit (EBIT)
- Interest
- Tax
= Net profit

Assets = liabilities + equity, always. Profit is not cash: a sale on credit is revenue today and cash later, and a server bought for cash today becomes expense over several years.

Unit economics formulas

Work out the money for one unit (an order, a customer, a store) before the totals. Use margin, not revenue, in every ratio (Unit economics, Unit economics).

Measure	Formula	Rule of thumb	Lesson
Gross margin %	(revenue − COGS) ÷ revenue	Grocery margins are thin; software margins are high	Three statements
Contribution margin per order	order revenue − all variable costs of that order (goods, picking, rider, packaging, payment fees)	Must be positive before fixed costs can be covered	Unit economics
Break-even volume	fixed costs ÷ contribution margin per unit	Tells you how many orders a month cover the fixed costs	Unit economics
CAC (customer acquisition cost)	sales and marketing spend ÷ new customers won	Include discounts and referral bonuses	Unit economics
LTV (lifetime value), simple	monthly margin per customer ÷ monthly churn rate	Use margin per customer, not revenue	Unit economics
LTV to CAC	LTV ÷ CAC	About 3 or more is often called healthy	Unit economics
CAC payback	CAC ÷ monthly margin per customer	Under 12 months is often seen as good	Unit economics
Burn and runway	runway (months) = cash ÷ net monthly burn	Plan new funding well before it reaches zero	Budgets
Unit cost of tech	monthly cloud cost ÷ monthly orders	Should fall as volume grows	FinOps

A worked order at Mangrove

Illustrative numbers for one app order. Keep money as integer cents in code; dollars here for reading (Unit economics).

Output

Basket value                     $18.00
- Goods (cost of the groceries)  -13.23
- Picking and packing             -1.20
- Rider                           -2.00
- Packaging                       -0.20
- Payment fee                     -0.30
= Contribution margin            $ 1.07 per repeat order
- A $1.50 first-order discount    -1.50
= -$0.43 on a discounted order

Fixed costs of the app team      $60,000 a month
Break-even                       60,000 ÷ 1.07 ≈ 56,100 orders a month

Time value of money

A dollar today is worth more than a dollar next year, because it could earn a return meanwhile. Discount future cash flows at the company's required return, its discount rate or hurdle rate (ask finance for it) (Business cases).

Measure	Formula	Decision rule	Lesson
Present value	PV = C ÷ (1 + r)^t	What a future amount is worth today	Business cases
NPV (net present value)	NPV = Σ C_t ÷ (1 + r)^t, for t = 0 to n, with C₀ the (negative) upfront cost	Positive NPV adds value at that discount rate	Business cases
IRR (internal rate of return)	The rate r that makes NPV = 0	Accept if IRR is above the hurdle rate; compare mutually exclusive options by NPV	Business cases
Simple payback	upfront cost ÷ yearly (or monthly) net benefit	Easy to explain; ignores later years and the time value of money	Business cases
Discounted payback	Years until the running total of discounted cash flows turns positive	Stricter than simple payback	Business cases
ROI	(total benefit − total cost) ÷ total cost	Say over what period; it ignores timing	Business cases

Spreadsheet functions (Excel and Google Sheets)

These names and argument orders work in both Excel and Google Sheets. The common trap: NPV treats its first value as arriving one period from now, so add the upfront cost (period 0) outside the function (Business cases).

I want to…	Function	Example
NPV with an upfront cost in B2 and yearly flows in B3:B7	`NPV(rate, value1, …)`	`=NPV(10%, B3:B7) + B2`
IRR of the same flows (B2 negative)	`IRR(values, [guess])`	`=IRR(B2:B7)`
NPV with uneven dates	`XNPV(rate, values, dates)`	`=XNPV(10%, B2:B7, A2:A7)` (first value is on the first date, not discounted)
IRR with uneven dates	`XIRR(values, dates, [guess])`	`=XIRR(B2:B7, A2:A7)`
IRR with a realistic reinvestment rate	`MIRR(values, finance_rate, reinvest_rate)`	`=MIRR(B2:B7, 8%, 6%)`
Present value of a future amount	`PV(rate, nper, pmt, [fv], [type])`	`=PV(10%, 3, 0, -1000)` gives about 751.31
Monthly payment on a loan or lease	`PMT(rate, nper, pv, [fv], [type])`	`=PMT(8%/12, 36, -120000)`
Future value of steady savings	`FV(rate, nper, pmt, [pv], [type])`	`=FV(5%/12, 24, -500)`
Straight-line depreciation per year	`SLN(cost, salvage, life)`	`=SLN(2400, 0, 3)` gives 800
Try many discount rates at once	Data table (Excel: What-If Analysis), or one NPV per row	Rows 6%, 8%, 10%, 12%; one NPV each

A business case on one page

Finance reads the numbers; leaders read the first paragraph. Lead with the ask and the answer (Business cases, Business cases).

Markdown

Ask: $180,000 for route planning software for the 4 distribution centres.
Benefit: about $11 saved per wholesale drop, ~15,000 drops a month.
Assumptions (and who checked them): drop cost from the DC finance lead; saving from a 2-week pilot.
Cash flows by year (Y0 to Y3), discount rate from finance.
NPV, IRR, payback. Sensitivity: what if the saving is half?
Options: do nothing, build, buy, partner. Risks and how we limit them.
Non-financial: rider safety, customer delivery windows.
Decision needed from: COO, by: date.

Show the base case, a pessimistic case and the break-even assumption ("it pays back within a year as long as each drop saves at least $1": $180,000 ÷ (15,000 drops × 12 months)).
Count benefits you can measure; list the others separately rather than inflating the numbers.
Include people's time at the fully loaded cost (Mangrove uses about $5,000 a month per engineer).

Budgets, capex and opex

A budget is a plan for money by month. Build it from drivers (people, volumes, prices), not last year plus 10% (Budgets, Budgets).

Topic	What to know	Lesson
Opex	Day-to-day running costs, expensed in the period: cloud, SaaS, support, most salaries	Budgets
Capex	Spending on assets that last more than a year, spread over their useful life: laptops, scanners, servers, some capitalised development	Budgets
Capitalised development	Some work building new software can be capitalised under accounting rules; maintenance and research usually cannot. The company's policy decides	Budgets
Headcount cost	Fully loaded cost × months employed this year; a hire starting in April costs 9 months, not 12	Budgets
Run rate	This month's cost × 12; shows next year's starting point	Budgets
Variance	Actual − budget each month, with a one-line reason for anything large	Budgets
Forecast	Updated view of the full year, usually each month or quarter	Budgets
Run, grow, transform	Split tech spend into keeping the lights on, improving, and new bets	Budgets

FinOps: cloud cost moves

FinOps makes the teams that spend cloud money see and own it. First make cost visible per team and per product, then optimise (FinOps, Cloud and cost).

Move	How	Watch out	Lesson
Tag everything	team, service, environment tags, enforced in infrastructure as code	Untagged spend needs a rule and an owner	FinOps, IaC
Showback or chargeback	Monthly cost report per team (showback) or billed to their budget (chargeback)	Agree how shared platform cost is split	FinOps
Turn off idle resources	Stop non-production environments at night and weekends	Owner and schedule in the tag	FinOps
Rightsize	Match instance and database size to actual use	Check peak (festival) load first	FinOps
Commit for discounts	Reserved instances, savings plans or committed use for the steady base	Commit only what you are sure to use	FinOps
Spot or preemptible capacity	For batch jobs and workers that can restart	Not for anything that must stay up	FinOps
Cut data transfer	CDN for images, keep chatty services in one zone, compress	Transfer is easy to miss on the bill	FinOps, Files and CDNs
Storage lifecycle	Move old logs and backups to cheaper tiers, delete what policy allows	Keep what retention rules require	FinOps
Budgets and alerts	Alert at 80% and 100% of a team's monthly budget	Alerts need someone who acts on them	FinOps

Build or buy: what to count

Compare total cost of ownership over the same period, usually 3 years, plus what it means for the business. Build what makes you different; buy what everyone needs (Build or buy, Build or buy).

Cost or factor	Build	Buy
Upfront	Engineer months × fully loaded cost	Licence, setup and integration work
Running	Hosting, on-call, upgrades, security fixes (often 15 to 25% of build effort a year)	Subscription per user or per transaction, price rises at renewal
People	Team must stay to maintain it	Admin, vendor management, internal support
Fit	Exactly your process	Change your process to fit, or pay for custom work
Time to value	Months	Weeks, if integration is simple
Exit	You own it	Data export, contract end, switching cost
Risk	Delivery and key-person risk	Vendor failure, lock-in, data handling

Numbers worth remembering at Mangrove

Reuse these in examples so they match the lessons.

What	Value	Lesson
Technology spending a year	about $28 million	Three statements
Cloud bill	about $540,000 a month	FinOps
Engineer, fully loaded	about $5,000 a month	Budgets
Store staff	about $4 an hour	Business cases
Partner app (outside agency)	about $390,000 a year to build and run	Build or buy
App orders	about 60,000 a day, 4× at festival peaks	Unit economics

Glossary

Plain definitions of the finance terms tech teams meet most.

Accrual accounting: Recording revenue and costs when they are earned or used, not when cash moves. Three statements
Amortisation: Spreading the cost of an intangible asset, such as capitalised software, over its useful life. Three statements
Balance sheet: What a company owns and owes on one date; assets equal liabilities plus equity. Three statements
Break-even: The volume at which contribution margin covers fixed costs. Unit economics
CAC: Customer acquisition cost: sales and marketing spend divided by new customers. Unit economics
Capex: Capital expenditure: spending on assets that last more than a year. Budgets
Cash flow statement: Where cash came from and went: operating, investing and financing. Three statements
Chargeback and showback: Billing teams for their cloud use, or just showing them the cost. FinOps
COGS: Cost of goods sold: the direct cost of what was sold. Three statements
Contribution margin: Revenue of a unit minus its variable costs. Unit economics
Depreciation: Spreading the cost of a physical asset, such as a scanner, over its useful life. Three statements
Discount rate (hurdle rate): The return the company requires, used to bring future cash to today's value. Business cases
EBITDA: Earnings before interest, tax, depreciation and amortisation. Three statements
FinOps: The practice of making cloud spending visible, owned and optimised by the teams that use it. FinOps
Fixed cost: A cost that does not change with volume in the short term, such as salaries and rent. Unit economics
Fully loaded cost: Salary plus benefits, taxes, equipment and overhead for one person. Build or buy
Gross margin: Revenue minus COGS, as a share of revenue. Three statements
Income statement (P&L): Revenue, costs and profit over a period. Three statements
IRR: Internal rate of return: the discount rate at which a project's NPV is zero. Business cases
LTV: Lifetime value: the margin a customer brings over their whole time as a customer. Unit economics
NPV: Net present value: all cash flows of a project discounted to today and added up. Business cases
Opex: Operating expenditure: running costs expensed in the period. Budgets
Payback period: How long until a project's benefits repay its cost. Business cases
Run rate: A current monthly figure multiplied by 12 to show the yearly pace. Budgets
Sensitivity analysis: Changing one assumption at a time to see how much the answer moves. Business cases
TCO: Total cost of ownership: every cost of an option over its life, not just the price. Build or buy
Unit economics: Revenue and costs for one unit, such as an order or a customer. Unit economics
Variable cost: A cost that rises with each unit sold, such as rider pay per delivery. Unit economics
Variance: The difference between actual and budget, explained each month. Budgets

Courses on Kolom

Finance for Tech Teams: the three statements, unit economics, budgets, FinOps, business cases and build or buy.
The Business of Product: unit economics, business cases and pricing from the product side.
Leading a Tech Department: department budgets, risk and talking to the board.
Strategy, Priorities & Roadmaps: turning money and strategy into what to build first.