Business executives and senior managers understand the challenges of capital planning and optimization. They are difficult skills to master.
Effective capital planning decisions can lead to significant competitive advantages. Capital optimization can lower wasted resources on unnecessary projects and lead to improved profitability.
Companies across the world are already looking for methods and techniques to improve their current processes. Here are a few trends or patterns that are showing up across the business world:
For efficient capital investment, executives and managers need the right information that paints an accurate big picture. An integrated view of a capital portfolio provides the necessary clarity.
When companies prioritize maintaining an effective portfolio, it gains visibility and insights that can help them set up better capital spending strategies.
If a company requires a future large investment in equipment and infrastructure that is mission-critical, it needs to plan for the money.
Without an integrated capital portfolio, companies end up spending on ad-hoc assets. It can lead to lack of funds for the right project at the right time. So, companies are prioritizing portfolio maintenance. It is helping them better manage their capital investments and opening new opportunities for capital optimization.
Even though infrastructure and equipment cost affect the whole company, capital planning responsibilities are often delegated to the engineering teams.
The priorities of engineering teams are not always in accord with other business units. It can lead to unbalanced capital planning. Companies that use the collective knowledge and wisdom of the whole workforce tend to make better business decisions. More businesses are investing in digital tools that help them manage CapEx throughout the company.
These digital tools are helping with productive cross-disciplinary conversations. Business units are able to collaborate better, be more transparent and help each other through more effective review processes.
Companies have to deal with a multitude of capital expenditures throughout the year. Some expenses are related to regulatory requirements, others are geared towards profit. Different projects play different roles in keeping businesses running.
However, it’s difficult for organizations to properly judge which projects are more important without having a proper way to compare. So more companies are investing time and resources on discussing the qualitative and quantitative qualities of their projects and ranking them on a common scale.
It’s giving businesses the power to make more objective decisions during capital planning sessions.
The scope of a project can dramatically change during its life. In order to provide accurate perspective, every project proposal needs a detailed business case.
The business case should have business rationales, alternatives, schedules, risks, and projections. It’s important to regularly scrub and optimize the business case throughout the lifecycle.
Regular updates will help with capital optimization and lead to a reduction in wasted capital spending. Companies are putting more effort into scrubbing and optimizing business cases for capital projects.
Calculating return on investment (ROI) is a complicated task that requires the support of the finance team. Even though it is a time-consuming process, companies are realizing the importance of this metric on a project level.
So they are trying to build processes or use tools that automate ROI calculations. The processes and tools are opening opportunities to follow ROIs closely and make more effective capital investments. They are reducing errors, increasing transparency and saving time.
ROIs are also playing important roles in the post-completion analysis. Companies are using the metric to figure out capital investment effectiveness.
Calculating return on investment (ROI) is a complicated task that requires the support of the finance team. Even though it is a time-consuming process, companies are realizing the importance of this metric on a project level.
So they are trying to build processes or use tools that automate ROI calculations. The processes and tools are opening opportunities to follow ROIs closely and make more effective capital investments. They are reducing errors, increasing transparency and saving time.
ROIs are also playing important roles in the post-completion analysis. Companies are using the metric to figure out capital investment effectiveness.
Companies who rely on antiquated spreadsheet-based analytics cannot survive in today’s market. Companies need frequent access to predictive analytics, so they can shift their capital investments fast.
Improving the forecasting cycle requires companies to invest in data aggregation tools that lead to real-time analytics.
Businesses are investing in digital reporting and forecasting tools that give them the ability to make tactical decisions in the blink of an eye. Companies that use these digital tools are nimbler and they outperform their competitors.
The advancement of technology has made it possible for all businesses, small or large, to take advantage of these business analytics tools.
Capital planning used to involve more long-term allocation of funds. However, due to acceleration in technological changes, predicting capital costs are becoming more difficult.
Also, organizations need better ways to evaluate the value of investments. So more companies are adopting continuous capital planning philosophy. It is helping organizations lower capital expenditures.
Also, organizations are using shorter review cycles for capital planning. With the help of digital tools, every project is being tracked by ROI and the budgeting decisions are being made dynamically based on those metrics.
Today capital planning requires companies to have both the right tools and the right processes. Organizations have to invest in tools that will allow their teams to have the appropriate information quickly. But at the same time, companies need to create processes that empower all business units to contribute to capital investment decisions.
At Inpensa, we help companies find better investments through our innovative SaaS technology. We can help you with every aspect of your capital planning and optimization project. For a demo, contact us today. Our experts are ready to help you. Learn more HERE or Contact Us
