Why your capital budget is probably being underspent
Your organization has just entered Q4 and the COO is concerned that it may, again, be under-spending its available capital budget based on the final Q3 numbers at hand. As a result, there’s fear that as a company, you may be missing out on capital investment opportunities that could potentially drive long-term growth and profitability for stockholders.
It’s a tale as old as time. You’ve held back on committing on what appear to be attractive investments because you’re not sure how they really compare with other projects tentatively placed in the budget or opportunities that may come along later in the year. Then, since it’s difficult to know where you really stand against budget across all the projects being invested in across the organization (and thus how much money is really available), you’ve held back to make sure you are not over your capital plan.
Now you face two options – neither of them pleasant. You can either race to spend as much as possible before the end of the fiscal year (and therefore overpay for the assets acquired), or underspend the budget and potentially dampen your company’s future prospects.
This is a common occurrence among companies of all sizes. Without visibility into what projects are being undertaken or even considered across business units, there’s no way to prioritize, approve and report on their performance.
To avoid these capital budget pitfalls, it’s imperative to ensure that all investments in the organization’s pipeline can be managed and analyzed alongside one another within a single system of record.
For further related reading, download our executive briefing, Exploring the Benefits of a Streamlined Capex Planning and Budgeting Process.