KDA Capabilities
Lever to Ledger™ · General · Model v2

How AI and IT investment moves from operational levers to the ledger.

Every investment moves an operational lever. Every lever moves a ledger line. The ledger rolls up to one run-rate figure, and time turns that figure into cash. Set the levers and the model builds a business case a CFO can reproduce line by line.

The idea

Every lever, traced from the metric it moves to the ledger line it reaches.

Read left to right. Each lever has the level-1 metrics a team tracks. Each lever moves money in specific places. Those places land on six ledger lines, and the ledger rolls up to the run-rate annual impact. Click any box to trace its path. Hover for a definition. Figures update live from the model below.

Operational levers
Where money moves
The ledger
Level-1 metrics
Lever
Ledger line
Roll-up
Result line
Headline
Price realisation
Discount leakage
Win rate at list price
Pricing
$0.00M a year
Customer churn rate
Renewal rate
Share of wallet
Customer retention
$0.00M a year
Extra volume absorbed in 30 days
Time to scale up
Orders declined at peak
Flexibility
$0.00M a year
Concept-to-launch time
Time to first revenue
Release frequency
Speed to market
$0.00M a year
Orders right first time
On-time, complete delivery
Rework and defect rate
Reliability and quality
+$2.80M a year
Cost per unit of work
AI-assisted share of volume
Cost reduction
+$1.00M a year
Volume handled per person
Utilisation of capacity
Hires avoided
Capacity
$0.00M a year
Incident rate
Audit findings
Penalty and remediation hours
Risk and compliance
$0.00M a year
Signal-to-action time
Days to bill and collect
Inventory days
Decision speed
$0.00M a year
Utilisation of plant and equipment
Output per square metre
Idle asset hours
Asset utilisation
$0.00M a year
Volume held
Lost sales recovered
Demand captured at peak
Earlier launch revenue
Price realised
Rework and scrap
Expedite cost
Delivery labour
Materials and handling
Service and support load
Back-office processing
Hiring avoided
Incident and remediation cost
Run cost R: platform, licences, tokens
Safety and buffer stock
Replenishment cycle
Obsolete stock
Billing cycle
Collection days
Disputed invoices
Plant and equipment
Warehouse and space
Fleet and infrastructure
Revenue
$200.0M
$0.00M
Cost of goods
$118.0M
−$2.00M
Operating cost
$49.6M
−$0.40M
Inventory
$30.0M
−$10.0M
Receivables
$33.0M
$0.00M
Fixed assets
$40.0M
$0.00M
Gross profit
$82.0M
+$2.00M
Operating profit
$32.4M
+$2.40M
Capital employed
$103.0M
−$10.0M
Rate r
8%
Tax
$5.51M
+$0.41M
Net profit
$26.9M
+$1.99M
Asset turnover
1.94×
+0.17×
Yearly cost of capital tied up
$8.24M
−$0.80M
Run-rate annual impact
$3.20M
a year, pre-tax
plus $10.0M cash once in the business case
CLICK ANY BOX TO TRACE ITS PATH
The method

One formula a finance director can check, and three views of it.

Run-rate annual impact = ΔP + ΔC − R + (r × ΔK)
ΔP + ΔC − R is the change in operating profit, before tax. r × ΔK is the yearly cost of the capital no longer tied up. Every term is pre-tax, so Δ economic profit = run-rate annual impact × (1 − t).
ΔP
Profit uplift

Extra volume at the gross margin, plus price realised, plus cost of goods saved.

ΔC
Gross cost saving

Operating cost the levers remove, shown gross.

R
Run cost

The full yearly run cost of the technology: platform, support, licences and usage such as tokens.

ΔK
Capital released

Inventory, receivables and fixed assets that become cash, less the working capital that growth needs.

r
One pre-tax rate

Set by the CFO: the borrowing rate or the house rate. It carries capital and discounts cash.

Three views of one engine
Run-rate view

Annual impact at full adoption. Used in workshops and for quick comparison across a portfolio.

Business case view

Investment, run cost and an adoption ramp over 3 years, with capital counted once as cash. It reports NPV, future value, ROI, payback, discounted payback and IRR.

Confidence view

Worst, base and best cases, with the spread set by the evidence behind each lever, plus an expected NPV weighted 25/50/25.

Four roll-up rules
1
Overlapping savings combine

Savings on one line combine multiplicatively, so each lever saves a share of what the others leave. Revenue gains from different levers add.

2
Working capital grows with volume

Extra revenue needs receivables and extra volume needs inventory, at the baseline days. Both come off capital released.

3
Only realised capital counts

Inventory and receivables count at 100%. Fixed assets count at 0% until the team names the sale or the capex avoided.

4
One pre-tax rate

The same rate r carries capital in the run-rate view and discounts cash in the business case.

Worked example: an AI quality and planning project
An illustrative manufacturer: revenue $200M, 40% gross margin, operating cost $50M, inventory $40M, receivables $33M, fixed assets $40M, tax 17%, r 8%. The project costs $8.0M today and $0.6M a year to run. Illustrative figures, US$ millions.
Reliability: rework$10M × 20%Cost of goods −2.00 a year
Reliability: buffer stock$40M × 25%Inventory −10.00 once
Cost reduction: work automated20,000 hours × $50Operating cost −1.00 a year
ΔP2.00
ΔC1.00
R−0.60
r × ΔK ($10M × 8%)0.80
Run-rate annual impact3.20 a year
ΔK released as cash10.00, once

A productivity case counts the hours automated: $1.0M a year. Over 3 years the base case brings $16.6M of benefit: $6.6M from operations and $10.0M of capital returned as cash. The operating cost saving alone is $2.2M, about 13% of the total. The other 87% sits in cost of goods and on the balance sheet.

Base case: NPV $4.72M at 8%, ROI 69%, payback in 1.6 years. Expected NPV across worst, base and best is $3.11M.

Interactive model

Set the levers, then read the business case.

Lever mode
Starting point
Project mode, for business cases. Each lever runs on a metric driver the team already tracks, so a finance director checks it in one step. The finance partner grades each row by the evidence behind it.
Pricing$0.00M
Revenue × price realisation gain → Price revenue
Customer retention$0.00M
Revenue × churn reduction → Volume revenue
Flexibility$0.00M
Revenue declined at peak × share recovered → Volume revenue
Speed to market$0.00M
Launches × months earlier × monthly revenue → Volume revenue
Reliability: lost orders$0.00M
Revenue × lost-order rate reduction → Volume revenue
Reliability: rework$2.00M a year
Rework and scrap cost × reduction → Cost of goods
Reliability: buffer stock$10.0M once
Inventory × buffer stock reduction → Inventory
Cost reduction: work automated$1.00M a year
Hours automated × loaded cost per hour → Operating cost
Cost reduction: cost of goods$0.00M
Addressable process cost × reduction → Cost of goods
Capacity$0.00M
Hires avoided × loaded cost per FTE → Operating cost
Risk and compliance$0.00M
Incidents avoided × cost per incident + penalties avoided → Operating cost
Decision speed: billing$0.00M
DSO reduction × revenue ÷ 365 → Receivables
Decision speed: replenishment$0.00M
Inventory days reduction × cost of goods ÷ 365 → Inventory
Asset utilisation$0.00M
Fixed assets × (1 − old ÷ new utilisation) → Fixed assets
Run-rate annual impact
$3.20M
a year, pre-tax, at full adoption
ΔP profit uplift+$2.00M
ΔC cost saving+$1.00M
R run cost−$0.60M
r × ΔK, 8% × $10.0M+$0.80M
Business case, base
NPV at 8%$4.72M
Expected NPV$3.11M
Payback1.6 years
ROI, 3 years69%
The case creates value in the base and best scenarios. In the worst scenario it ends year 3 $6.49M short of payback.
Business case, year 0 to year 3
US$ millions. Year 0 is today's spend. Benefits and costs land at each year end. Capital counts once, as cash, in the year its lever takes hold.
Base case
Year 0
Year 1
Year 2
Year 3
Adoption
40%
80%
100%
Operating benefit
1.20
2.40
3.00
Run cost
−0.60
−0.60
−0.60
Capital released as cash
4.00
4.00
2.00
Investment
−8.00
Net cash flow
−8.00
4.60
5.80
4.40
Cumulative cash
−8.00
−3.40
2.40
6.80
Measures by scenario
The spread comes from the evidence grade on each lever. Worst and best also run their own adoption ramps and cost factors.
Measure
Worst
Base
Best
NPV at 8%
−$7.13M
$4.72M
$10.1M
Future value at year 3
−$8.99M
$5.95M
$12.8M
Return on investment, 3 years
−51%
69%
142%
Payback
Beyond year 3
1.6 years
0.8 years
Discounted payback
Beyond year 3
1.8 years
0.9 years
Internal rate of return
−33%
39%
91%
Run-rate annual impact
$1.12M
$3.20M
$4.02M
Expected NPV, weighted 25/50/25$3.11M
The case creates value in the base and best scenarios. In the worst scenario it ends year 3 $6.49M short of payback.
Cumulative cash by scenario
WorstBaseBest
Year 0Year 1Year 2Year 312.540.00−10.40
The ledger, before and after
Base case at full adoption, US$ millions. Operating cost includes the run cost. Economic profit = (operating profit − r × capital employed) × (1 − t).
Line
Before
After
Change
Revenue
$200.0M
$200.0M
$0.00M
Cost of goods
$120.0M
$118.0M
−$2.00M
Gross profit
$80.0M
$82.0M
+$2.00M
Operating cost, including run cost
$50.0M
$49.6M
−$0.40M
Operating profit
$30.0M
$32.4M
+$2.40M
Tax
$5.10M
$5.51M
+$0.41M
Net profit
$24.9M
$26.9M
+$1.99M
Inventory
$40.0M
$30.0M
−$10.0M
Receivables
$33.0M
$33.0M
$0.00M
Fixed assets
$40.0M
$40.0M
$0.00M
Capital employed
$113.0M
$103.0M
−$10.0M
Asset turnover
1.77×
1.94×
+0.17×
Economic profit
$17.4M
$20.1M
+$2.66M
How the run-rate builds
Four terms step to the headline. Run cost steps down.
ΔP profit uplift+$2.00M
ΔC cost saving+$1.00M
R run cost−$0.60M
r × ΔK+$0.80M
Run-rate annual impact$3.20M
ΔK, cash once in the business case$10.0M
Contribution by lever
Each lever on its own, base case at full adoption. Savings on a shared line combine, so the overlap row reconciles the levers to the total.
Lever
Ledger lines moved
Evidence
A year
ΔK once
Pricing
Revenue
Estimate
$0.00M
$0.00M
Customer retention
Revenue
Estimate
$0.00M
$0.00M
Flexibility
Revenue
Estimate
$0.00M
$0.00M
Speed to market
Revenue
Estimate
$0.00M
$0.00M
Reliability and quality
Revenue, Cost of goods, Inventory
Estimate
+$2.80M
$10.0M
Cost reduction
Operating cost, Cost of goods
Estimate
+$1.00M
$0.00M
Capacity
Operating cost
Estimate
$0.00M
$0.00M
Risk and compliance
Operating cost
Estimate
$0.00M
$0.00M
Decision speed
Receivables, Inventory
Estimate
$0.00M
$0.00M
Asset utilisation
Fixed assets
Estimate
$0.00M
$0.00M
Overlap between levers
Shared lines combine
$0.00M
$0.00M
Run cost
Operating cost
−$0.60M
Run-rate annual impact
$3.20M
$10.0M
Inputs and owners
Every number has an owner. Replace each illustrative default with the owner's figure.
Company baselineFinance partner
Rate and scenario weightsCFO
Project costsCIO
Adoption rampsBusiness owner
RealisationFinance partner
Evidence grades and working capitalFinance partner
Measured: spread 10%. Benchmark: 25%. Estimate: 50%. Worst keeps 1 − s of each benefit and pays 1 + 0.6s of cost. Best gains 1 + 0.4s and pays 1 − 0.2s. Project mode grades each driver row on its card; quick mode uses the three group grades.
Checks
Live tie-outs from the workbook's Checks sheet. Every one reads TRUE before a case goes to the CFO.
Run-rate annual impact = Δ operating profit + r × ΔKTRUE
Δ economic profit = run-rate annual impact × (1 − t)TRUE
Δ capital employed = −ΔKTRUE
Capital released over 3 years = year-3 adoption × ΔK, each scenarioTRUE
Worst NPV ≤ base NPV ≤ best NPVTRUE
Ramps never fallTRUE
Scenario weights sum to 100%TRUE
Combined savings on a line never exceed the sum of lever savingsTRUE
Save and share
The PDF carries the run-rate, the three-year case, the measures, the ledger, the inputs and the disclaimer.
How KDA uses it

Leaders bring a live initiative. They leave with a business case their CFO can reproduce.

Know

Map the initiative to its levers, the ledger lines they reach and the metric driving each one. A claim with no ledger line comes off the page. The finance partner grades the evidence.

Decide

Replace the defaults with the team's own figures, then rank levers by their NPV contribution and by evidence grade. Plan the test that moves the largest Estimate to Measured.

Act

Run the checks until every one reads TRUE. Then take all three views into the funding conversation.

Lever to Ledger runs inside KDA workshops and masterclasses on strategic technology, taught through the Know-Decide-Act® method.

Assumptions and disclaimer

Every default is an illustrative assumption.

KDA set these figures for teaching. They come from no client and no published benchmark. Replace each one with your own evidence before the number leaves the room.

Quick mode: lever effects at full intensity
Percent change in the ledger line when a lever sits at 100. Basis for every row: illustrative assumption.
Lever
Ledger line
Max effect, %
How it applies
Pricing
Revenue (price)
Price realised, no added cost
Customer retention
Revenue
Volume at the gross margin
Flexibility
Revenue
Volume at the gross margin
Speed to market
Revenue
Volume at the gross margin
Reliability and quality
Revenue
Volume at the gross margin
Reliability and quality
Cost of goods
Cost of goods saved
Reliability and quality
Operating cost
Operating cost saved
Reliability and quality
Inventory
Inventory released
Cost reduction
Cost of goods
Cost of goods saved
Cost reduction
Operating cost
Operating cost saved
Capacity
Operating cost
Operating cost saved
Risk and compliance
Operating cost
Operating cost saved
Decision speed
Receivables
Receivables released
Decision speed
Inventory
Inventory released
Asset utilisation
Fixed assets
Fixed assets freed, at realisation
Model rules. Volume revenue carries cost of goods at the baseline ratio; price realised carries none. Cost savings show gross and the run cost sits on its own line. Savings on one line combine multiplicatively. Working capital grows with volume at baseline days when the switch is on. Freed capital counts at its realisation factor. Annual impact and every cash flow are pre-tax; the ledger shows tax, net profit and economic profit for reference. The horizon is 3 years and nothing counts after year 3.
Disclaimer

This is an illustrative model for executive education. It is not financial advice and it does not show reported financials. Figures are in US$ millions.

The Lever to Ledger model by KDA Capabilities. Lever to Ledger™ · schema lever-to-ledger-general/2.0