Improving Capital Investment Priority Decisioning

A recent Gartner whitepaper tackles the problem of effective capital investment prioritization.  Read on for an Inpensa summary and access the full report here “3 Essential Profitability Strategies & Guides for CFO Success”

Finance leaders often face the challenge of reprioritizing capital investment initiatives, but they seldom seize the opportunity to rethink their approach. According to Gartner, the root causes for their challenges generally lies in one or more of the following practices:

• Business cases often contain too much and irrelevant detail which leads to lengthy, burdensome prioritization.
• Managing reprioritization across strategic investments frequently omits resource commitments which hampers trade-off assessment.
• Investment prioritization tends to rely on business case evaluation, stress-testing and other front-loaded processes instead of performance management.

Gartner’s recommended approach to improving CapEx management including reprioritization revolves around three key principles.

1. Align the request with the corporate growth strategy before building and analyzing the investment business case. In other words, start by comparing the objective against the financial and non-financial corporate growth criteria as an input to priority setting.
2. Adopt a prioritization process that utilizes weighted quantitative methodologies based on ranges instead of precision. Projects that are more strategically aligned would carry a higher weight.
3. Extend the prioritization process to in-flight investments to help ensure that shifts in focus are duly recognized. Whether or not an in-flight effort is on schedule or under budget should be part, not all, of the reprioritization decision.

C-Level Financial Executives and D-Level Financial Practitioners designed the Inpensa platform to simplify Capital Expense Management with client-configurability. Our greatest achievement is a collaborative, successful implementation that automates the mundane, thereby enabling clients to focus on continuous profitable investment.