Discover how CapEx automation replaces manual, error-prone CapEx approval processes with standardised workflows, faster approvals, complete governance, and greater visibility of CapEx spend.
Capital appropriation requests (CAR) represent some of the most important decisions taken by a company, often involving substantial outlays, detailed business cases, and lengthy approval cycles with multiple stakeholders.
Tracking users’ spending limits, the required approvals, and the status of requests can be very complicated, especially if the requests are on paper and your staff are geographically dispersed. Financial professionals have resorted to ad-hoc methods, including the use of spreadsheets, to keep track of the approval process and CapEx spending.
The result is an elongated, error-prone, and disconnected process with little centralised visibility.
According to Mckinsey, achieving world-class CapEx management can reduce overall CapEx spending by 15 to 25 per cent. But how does an organisation achieve best-in-class CapEx management? Alongside setting budget thresholds and observing internal governance procedures, workflow software is another way organisations can achieve CapEx management best practice.
In this blog, we reveal 12 benefits of automating your capital expenditure approval process with workflow software.
#1 Accelerate CapEx approvals
Routing a CapEx approval form to the right people in the right order – without losing anything along the way – is notoriously slow and cumbersome for several reasons:
- Paper CapEx approval forms frequently involve lengthy eMail chains and multiple versions of the same document and/or spreadsheet in circulation. Consequently, senior executives further up the approval hierarchy may need to locate the latest version of the budget spreadsheet or scroll through a long eMail chain, leading to inefficiencies and delays.
- Requests are sent off with no way to track where they stand at any given moment leading to a lack of visibility and transparency.
- Paper is not only slow to move around but it is also easy to fill in incorrectly or forget to attach crucial documentation, with mistakes only being spotted hours or days later.
- CapEx submissions and supporting information are easy to misplace with employees wasting time locating the forms in disparate systems. We often hear stories about the time spent looking for a document that was incorrectly filed or paperwork missing for weeks only to be found sitting on a desk.
- A missing link in the review and approval chain, due to absence or unavailability, can bring the whole process to a halt, leading to further delays in the process.
- Paperwork can rarely be handled by multiple individuals in parallel; it must make its way through the process sequentially
With CapEx automation managing repetitive tasks, employees will save time. Time-saving features such as auto-population and validation of data entry fields, automated workflows, and eMail notifications based on due dates and inactivity mean approval cycles will be significantly cut.
Moreover, during the requirement gathering phase, you will evaluate your current ‘As-Is’ state and model a future ‘To-Be’ workflow with redundancies and bottlenecks removed to further improve efficiencies.
#2 CapEx automation will eliminate paper
CapEx management systems reduce the amount of paperwork circulating in an organisation by digitalising your CapEx approval form with data validated on input or form submission to ensure you only submit accurate information for approval.
In an intuitive interface, you can build rich, interactive capital expenditure request forms to gather and display information about the CapEx project e.g., details, sponsors, quotes, risk assessments, and justifications.
#3 Standardise your CapEx approval process
Another benefit of CapEx software is the ability to automate the routing of completed CapEx requisition forms through bespoke authorisation paths based on asset category, business unit, budgets, and authorisation limits.
This is essential and often a legal requirement for publicly traded companies as it ensures they meet audibility and compliance requirements and is good practice for companies of any size.
#4 Send automated eMail alerts
One of the main challenges associated with a paper-driven approach is the process bottlenecks due to a capital expenditure approval form sitting in an approver’s inbox or being assigned to someone out of the office.
Your chosen CapEx management solution will send automated notifications based on role, due dates, delegations, inactivity, and more.
#5 Observe governance procedures and protocols
Even with a manual process, many organisations have a formal capital expenditure policy to ensure cash is spent efficiently and effectively. This means the approval will be made following pre-agreed limits of authority based on hierarchy/job role. Functional or asset category rules, such as seeking approval from the IT Director for all computer-related expenditure, may also exist. Unfortunately, a manual paper-driven process means that the policy is open to misuse.
Paper requests can often reach the approver missing crucial information, documentation, or signatures. Inevitably, this results in delays as the approver returns the request to the originator for clarification or rejects it altogether. In the worst case, time pressures may lead to the procedure being skipped or ill-informed decisions being made.
CapEx software enforces your internal governance procedures, ensuring that CapEx spending can only happen once the necessary approvals have been given.
Other rules such as approval limit setting, escalation procedures, and total spend authorisations can be easily configured.
#6 Greater visibility
A lack of visibility is often cited as a reason for automating an organisation’s capital expenditure approval process.
Once a paper CapEx approval form has been completed, the originator (and management alike) have little (or no) visibility over the approval process. This problem is a key challenge for organisations with a large geographical footprint.
Indeed, visibility was a major challenge for one customer who had a local office in Madrid, regional management in London and head office in New York all involved in the authorisation of an approval.
As far as the request originator was concerned, once the approval request had left the local office in Madrid, and gone to regional management in London, they had no idea whether it had been signed in London and routed to New York for Head Office sign-off – or whether it was still in London. They might occasionally get questions directed at them which gave them an idea of where it currently stood – but no visibility over the approval process – or the actions taken by process participants.
CapEx planning software allows initiators, approvers, and managers to monitor progress in real-time, discover bottlenecks, and intervene, if needed, to keep things running smoothly. For example, once an initiator raises a CapEx request, they have complete visibility over where it is, who is it with, and how long has it been with them. The initiator can, if necessary, nudge the right person because they know who has it.
Better management reporting and transparency
At the same time, teams spend time manually building reports for executives or compliance audits with staff formatting updates received from around the business. This is often a time-consuming process and management information is soon out of date as it’s based on a point in time and not real-time.
With CapEx approval software, you can quickly download standard dashboard reports in any format that offer a real-time snapshot of your business. Some of the most common reports include:
- Total number of CapEx submissions approved by business unit/country
- Total number of CapEx requests outstanding by business unit/country
- Average number of approval days per CapEx by business unit/country
- Total number of requests by type (i.e., profit generation/maintenance), asset category, and priority level
- Exception alerts if a deviation exists between actuals in the CapEx management solution and actuals in your financial software
Ultimately, the management dashboards increase visibility from the top down for financial transparency, and from the bottom up for better user confidence.
#7 Archive requests for regulatory compliance
With CapEx software, all system access is authenticated, and every user action is fully logged and auditable.
Approved CapEx requisitions are automatically archived allowing you to quickly review information about any activity, past or present, including time-stamped approval decisions, documents, and comments.
In the event of an audit, this archive is essential, but it can also provide statistical data to analyse spending or workflow metrics over many years. Automated retention policies can be applied to purge-down old data to a pre-defined schedule.
#8 Cost savings
Significant cost savings will be realised by implementing a CapEx approval system through:
- Tighter spending control
- Harmonisation of processes and capital spending across departments and geographies
- Eradication of procurement overlap
- Improved utilisation of existing equipment/capital
- Leveraging bulk-buying power
- Forecasted cash flow allows for savings through better capital management.
#9 Complete CapEx project management
The best CapEx approval software goes beyond simple capital expenditure approval with the ability to close the entire CapEx loop from request authorisation to project delivery and analyse the efficacy of CapEx spending.
Take, for example, the renovation of a hotel. Many CapEx tools will manage the initial request for funds, but the best CapEx management software will allow the cash flow and actuals to be gathered for post-project analysis and reporting.
As eCapEx is built upon a flexible and powerful eForms and workflow platform called Process Director, additional processes can be incorporated and linked to the original CapEx project. Consolidating related processes (e.g., purchase orders, new supplier onboarding, post-investment review) in a single project makes it easy to implement gradually – and yet for all the relevant parts to be viewed together as a whole by the users.
#10 No more delayed spending
Continual investment in a business is essential to maintain market share and involves acquiring new assets or upgrading existing ones to remain competitive.
A paper-based capital expenditure approval process can delay spending as people are “put off” by the long manual process and question whether the spending is necessary. The impact on the business is spending does not happen quickly enough which may harm profitability.
With CapEx software, the process is quick and simple with employees more inclined to initiate requests, giving you the edge over your competition.
#11 Collaborative document management
One of the challenges of a manual, paper-based process is that supporting paperwork and documents may get lost during the approval cycle.
Another challenge associated with paper is version control with key stakeholders often reviewing documents that have been superseded.
Similarly, clarifications sought during the approval cycle may not be appended to a paper form. For example, an individual might ask a question over the phone or eMail, but the answer might not be stored with the CapEx request form, and somebody else might ask the same question at a different approval level.
A good CapEx management solution will allow you to save a record of any questions and answers with the request. When a director authorises the request, they can see all the questions that have been asked, and the answers to those questions.
The document management capabilities in the system provide centralised control, security, versioning, and management of documents. Additionally, system users can collaborate (e.g., author, edit, amend, and annotate) simultaneously on documents, spreadsheets, and presentations.
#12 Work from anywhere
Capital expenditure approval software can be hosted in the cloud or on-premise.
Cloud-based systems will be accessible from any location, enabling authenticated users to work remotely.
Additionally, cloud-based deployments make the path to entry easier and cheaper. They offer reduced initial expenditure, and predictable ongoing costs while easing the demand on already stretched IT departments.
Are you looking to automate CapEx approval processes? Contact us or call 03300 100 000 to book a demonstration.
