What is an AFE – Authorization for Expenditure – in Capital Planning?
The AFE (authorization for expenditure) process is notoriously complex. It often involves input from various stakeholders across a wide range of departments, and approvals can take months to turn around. But it’s also essential for capital planners to understand. So, in order to help you get a handle on how it works, we’ve put together […]
AFE Processes in the Oil & Gas Industry Leave Room For Improvement
Capex approval workflow processes go by many different names, and getting a handle on the alphabet soup of acronyms can be dizzying. Capital Expenditure Authorizations (CEAs), Capital Expenditure Requests (CERs), and Capital Appropriation Requests (CARs) all refer to the same general process. In the oil & gas industry, the more common term is Authorization for […]
How Does Capex Impact ROIC?
When it comes to CFOs making an impact, they’re up against the clock from the get-go. Relentless shareholder scrutiny, constantly shifting market conditions, and the never-ending specter of organizational changes all add pressure to show results quickly. Chief among them: return on invested capital (ROIC). Why ROIC? Because, according to many, it’s the most important […]
AI: A Primer for Corporate Finance
Just a few years ago, artificial intelligence (AI) was a brand new technology that stoked excitement and fear. Concerns of a terminator-induced armageddon were just as common as predictions of stunning new technological breakthroughs. Since then, AI has transformed from frontier technology to practical business tool. While many are aware of its well-publicized feats, such as […]
Stock Buybacks vs. Capex: How Macroeconomics Frames the Debate
“Capital expenditures among companies in the S&P 500 have been growing at a faster pace than stock repurchases for the first time since the first quarter of 2021,” according to the Wall Street Journal. In the age-old debate around returning capital to shareholders versus investing in the future of the business, does this represent a […]
How Is Inflation Affecting Capex Decisions?
Whether it’s a carton of eggs or a tank of gas, prices are up in just about every corner of the economy. And while the implications for consumers or businesses at large are discussed night and day, there is less of a narrative around what it means for capital planners. For them, trying to decipher […]
Overcoming the Planning Fallacy with Reference Class Forecasting for Capital Projects
Bob from engineering has been submitting project proposals for the past decade, and always underestimates total costs. Despite double-checking with vendors and colleagues ahead of time, his projects seem to constantly run longer and cost more than initially expected. Bob isn’t purposely reckless, he just falls prey to a phenomenon that is common in business: […]
Capex vs Opex in a Connected Finance Framework
At a high level, the differences between Opex and Capex are very clear: Opex (operating expenses) covers an organization’s day-to-day expenses that keep the lights on, including payroll, rent, and inventory costs. Capex (capital expenses) covers major purchases that are meant to improve efficiency or capacity of current operations and/or generate value over the long […]
What is Capital Planning: The FP&A, Engineering & Accountant’s Perspective
By Charlie Rhomberg In the current environment of changing business models, monetary policy uncertainty, and an upside-down supply chain, making assumptions about the future can be futile. Yet, despite the clouded outlook, or perhaps because of it, prudent capital planning remains essential to success. To be in control amid these changing dynamics, companies need capital […]
In A World of Black Swan Events, Capital Budgeting Turns to Rolling Forecasts
Global health emergencies, sweeping monetary stimulus, and hundred-year storms used to happen, well, every 100 years or so. Not anymore. These “black swan” events are seemingly happening with greater frequency, creating disruption in corporate boardrooms around the world as business leaders scramble to react and adapt. This “new normal” requires adaptability, which – frankly – […]