Prospects often ask us if our capital expenditure management software is off-the-shelf.
The simple answer is yes. We have deployed it several times for all kinds of different organisations.
Yet before you start submitting CapEx requests electronically, you need to agree on what data the form will capture and map out the approval workflow. This requires an investment in time and resources from key stakeholders.
As low-code development grows in popularity, several vendors now claim to automate your CapEx approval processes in a few hours.
In our opinion, there is no shortcut to success.
In an ideal world, you would be able to tick a few boxes and go live, but it seldom works out that way. Your requirements might seem quite simple, yet the devil is always in the detail.
For a successful implementation, capital expenditure management software needs to be tailored. This approach involves detailed planning, time and resources and goes beyond configuring a few parameters.
In this blog, we reveal 14 questions you need to discuss internally and with potential vendors (during the initial fact-finding stage) before purchasing capital expenditure management software.
Modelling the form, which is the main interface through which many users will interact with the capital expenditure management system, around your existing paper or Excel-based forms is always a good way to help accelerate user familiarisation. Corporate branding also accelerates user acceptance and helps integration into the company culture.
There is no point in forcing users to fill in data that may not be relevant to their request. Conversely, you do not want users to submit high-value CapEx requests without crucial information that may inform an approval decision. The important fields will vary depending upon many factors, but only you can decide these rules.
Initially, you may decide to import exchange rate data from a live web service, so you always have up-to-date rates.
However, if you worked out capital expenditure budgets at a certain exchange rate (e.g., the averages of the prior year), do you need your expenditures against those budgets to be at the same rates for the entire period?
One organisation may decide that when you raise a CapEx request, it will be for a high-value purchase, and you will have already discussed and approved the premise.
In this scenario, most CapEx requests will likely be approved with the capital expenditure budget considered used as soon as the request is made. This will stop a business unit from going over budget.
However, other organisations may rely on speculative requests for early approval of lower-value items or new capital project ideas. Perhaps their approval lifecycle is much longer with many requests in-flight at any given time, some of which will likely be rejected. This may lend itself to considering the budget used when the CapEx request is approved, not when it is raised.
These are two different methods of handling the CapEx budget with hybrid models in-between.
Another consideration, in addition to budget tracking, is whether you need to record and track the actual cash flow? For many companies, this is an unnecessary overhead, but for the companies that need to closely manage cash flow for potentially significant expenditures, this can be crucially important.
In simple workflows, each approver would approve or reject a request but what if you wanted to include functional or departmental users to provide recommendations rather than decisions?
Perhaps you need the input of IT, Marketing, Health & Safety, or another department to review and add their comments to a request to help inform later approvers but these users themselves do not have the authority to reject a request. Implementing ‘recommendation’ steps alongside approval steps might be the solution.
Do you operate internationally? Do you have users around the globe speaking several different languages? If so, it might make sense to automatically display the capital expenditure request forms and user interfaces in the current user’s local language. Conversely, if you are expecting global authorisation from the head office, will you need to ensure the fields on the request form, such as the description or justification, are completed in the same language as the head office?
Or will three quotes be mandatory only if the requested amount is above a certain threshold? Can there be overrides to this? For example, if a product is only available from one supplier or when the request is an emergency?
Do approvers need to see an ROI spreadsheet (in an Excel template for consistency)? If so, this may be required for profit-generating purchases only, so you might need rules around this.
Some companies manage a strict user\business unit membership relationship, so when a user initiates a request, the capital expenditure management system can automatically determine which business unit it is for. This may seem more secure, and it prevents requests from being raised from the wrong unit. However, this membership management adds an additional administrative burden, and it can preclude regional users from raising requests for multiple business units within their jurisdiction.
Normally the departmental heads or local financial controllers who would have the authority to raise CapEx requests can be trusted to raise requests from the correct business units and should an error be made; it would normally be rejected anyway.
Should a request be for individual items, requiring multiple requests for more complex purchases or projects? Or can a CapEx request cover multiple items, and therefore asset categories, per request?
The capital expenditure management system is likely to highlight if a CapEx request will exceed the agreed budget. But how will you configure the system to respond? Will you allow the request to be submitted? Perhaps you will escalate the approval based on delegated authority limits in your authorisation matrix? Or will you reject the request and not allow it to be submitted?
Do you need to track post-CapEx spending and provide an analysis of the efficiency of CapEx spending? Many CapEx workflow tools will manage the initial request for funds, but will they track ROI for specific CapEx projects and collate cashflow/actuals for post-project analysis and reporting?
The capital expenditure process can sometimes begin by recording potential investment initiatives for consideration. This can capture the initial broad-stroke details about the project scope (e.g., resources required, benefit drivers) without the need to submit the detailed justifications and budgets required for a full capital request. The aim is to support a smooth transition from a potential project to a capital expenditure request if the initiative is selected.
The pre-approval of capital budgets is another early CapEx planning process involving multiple stakeholders. The budget is prepared annually which incorporates all planned spending for the period. Budgets are proposed, amended, and formally approved so automating this process with a workflow can add additional value to your organisation.
What about subsequent processes following the CapEx request approval such as purchase order requisition and new supplier onboarding?
Whether you want to create these separate workflows and forms and link them to the original CapEx project is an additional factor to consider when evaluating capital expenditure management software.
In our opinion, the ability to consolidate related processes in a single project in eCapEx makes it easy to implement gradually – and yet for all the relevant parts to be viewed together as a whole by the users.
When a fixed asset has reached the end of its useful life and cannot be repaired, it is likely to be sold or disposed of. Similarly, a capital asset may need to be transferred to another department.
Should the capital expenditure management software facilitate disposals, transfers, and other transactions to support the above scenarios?
This list is by no means exhaustive, but we hope it has provided an insight into the sorts of questions you should consider during the planning phase. There are no right or wrong answers here, and we would not dream of telling you how your organisation should answer these questions.
What you need is a platform that is flexible enough to work how you need it to and a partner with the experience to guide you through these decisions to ensure a successful implementation.
Are you looking to automate CapEx approval processes? Contact us today to schedule your CapEx approval workflow software demonstration.