Finario Capex Executive Briefings

A Guide to ERP Augmentation for Improved Capital Investment

If capital expenditure management hasn’t yet become a challenge using your company’s enterprise resource planning (ERP) system, there’s a good chance it will. Chief Financial Officers, Corporate Controllers, FP&A Directors and Engineering Chiefs in a wide range of industries have long realized that their ERP systems are, on their own, simply not up to the task.

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Why Capex? Why Now?

With immediate concerns of liquidity and access to capital receding, Capex is garnering more attention from Finance executives. In a recent survey, 79% of Chief Financial Officers reported taking a more hands on approach to capital investment. This note examines why capital investment is especially important today and how enterprises can benefit from a renewed focus on and new approach to Capex.

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Re-Examining Capital Planning & Budgeting

With Capex directly responsible for 50% of all corporate growth, capital investment performance is an essential foundation of long-term business success. In most companies, however, the executives responsible for building and managing the capital budget are hamstrung by manual processes and outdated or inadequate technology. As a cross-functional business process, Capex is poorly supported by most enterprise applications which are functional in orientation.

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Beyond Workflow: The Vital Importance of Capex

In larger organizations that have deployed custom, in-house Capex approval applications built on generic collaboration platforms such as Lotus Notes or Microsoft Sharepoint there is a natural tendency to think of Capex as a “workflow app.” Is this, however, the best way to think about Capex and will it lead to a solution for capital investment that is optimal for the organization?

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The Keys to Successful Capital Investment Authorization

Approving the portfolio of capex proposals which will make the maximum aggregate contribution to the company’s strategic objectives and enterprise value is critically important. If the project execution is good, but the wrong projects were selected, the organization will fall far short of its full potential. In fact, approval decisions taken on projects which have been well developed with realistic cost, benefit and risk assumptions and in the context of all relevant options will naturally lead to better overall project execution.

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Managing Capital Project Risk

Studies have shown that half of all corporate growth is directly attributable to prior capital investment. For many companies, however, obtaining the maximum benefit from Capex is challenging. Capital is not unlimited and hard choices must be made between competing investment alternatives. An often overlooked part of this allocation decision is risk.

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Overcoming Capital Project Evaluation Challenges

Why are so many capital projects late and over budget? Why do such a high percentage fail to deliver the promised benefits. Is it a poor project execution? While certainly sound execution is essential, many “execution” problems are an inevitable result of inadequate project planning and inconsistent capital project approval processes, not poor execution. A common Capex fallacy is that every project is unique – requiring special information and a custom management approach.

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How to Optimize Cash Flow Forecasting

Capturing actual costs by project and comparing them to those used to justify the investment is an essential discipline of capital investment management. Without this variance analysis, it would obviously be virtually impossible to improve performance. But what costs should be tracked and how often? How can regular analysis of past plans and both negative and positive divergences be used to best inform future decisions?

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Implementing an Effective Capex Sourcing Strategy

A common Capex fallacy is that every project is completely unique, necessitating a custom management approach from planning through execution. Companies operating under this mis-apprehension naturally see little role for procurement with its standardized processes and thereby forfeit a significant savings opportunity. Optimizing the sourcing-related opportunities in Capex starts with early involvement of the centralized procurement function in the Capex planning process.

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Capex Management: Spreadsheets v. the Cloud

Excel is the can do, all-purpose finance tool and every finance executive knows it inside and out. Not surprisingly, it is typically the main workhorse of the capital budgeting and approval processes at most companies under $1 billion in revenue. While larger enterprises have traditionally built custom applications for Capex, spreadsheets often still play a significant role there as well.

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Capex Management: Sharepoint v. the Cloud

In smaller organizations, Capital Expenditure requests and approvals are typically handled by paper or by emailing an Excel template around for signature. As companies grow, these manual processes become increasingly inefficient and painful. Historically, the answer has been to build a custom application, often using a generic platform like Lotus Notes (TM) or Microsoft Sharepoint (TM) as the base. While custom software development is rarely a core competence for most capital intensive industries, the lack of suitable third-party application left most firms with no choice.

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Adopting a Culture of Continuous Capex Improvement

A recent study concluded that companies employing best practices in capital expenditure management earned 25% higher profits than their peer group. While the desirability of best practices in Capex is thus very high, they cannot be simply bought. Getting there takes time and sustained effort. While external consultants can jump start the process or accelerate it, most companies seek to learn from their own mistakes and raise the performance bar over time.

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Explore More Capex Resources

Reports & Articles

Reports & Articles

Stay up-to-date with the latest capital and portfolio management trends with these hand-picked reports and articles.

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Product Brochure

Product Brochure

Download our product brochure to learn more about our comprehensive Capex solution.

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