“Capital expenditure must also present opportunities to obtain better value. The establishment of an effective capital evaluation system can achieve significant financial benefits in any organisation that doesn’t have one.”
If your Capital Expenditure (Capex) “wish list” exceeds the funds available, we can help you to get better outcomes from your investment programme.
We assisted a client in the health sector to make savings of 32% of their capital budget, without any compromise whatsoever to service delivery. Prior to that, we have made many recommendations which achieved substantial cost savings, by using existing resources more efficiently.
However, along with the hiring of staff, capital investment decisions are some of the most important any company has to make.
Within a budget, any excessive or unwarranted expenditure on capital projects has an opportunity cost, which can be thought of as cost saving or profit generating projects which are foregone, due to capital rationing. Thus, this opportunity cost is the organisation’s required rate of return on assets, and in organisations facing capital rationing, this rate can be much greater than the project’s interest and depreciation charges!
With more than 20 years specialist experience in capital expenditure evaluation, Capex® can help you establish an effective capital expenditure evaluation and management system. Sadly, we know that in many organisations, capex policies and procedures are developed by accountants for accountants. In contrast, our systems are developed specifically for managers, to enable them to manage more effectively. This is achieved by incorporating procurement, project planning and management, contractual, and operations management issues, as well as economic and accounting considerations. By applying a multi-disciplinary approach, better capital investment decisions are made.
Our clients have learned that by investing in the best capital management systems available, they have obtained a spectacular but sustainable return on their investment.
Typically, we expect clients to benefit by at least twenty times our fee within 12 to 15 months of an assignment being completed.
Is your capex prioritisation process as objective as it could be in screening “wish lists” so as to maximise outcomes from limited resources? And does your software incorporate key drivers to turn an ‘art’ (often subjected to politics) into a near perfect science ?
Are you satisfied that your business is making a “proper job” of its capital expenditure proposals – that objectives are evaluated, assumptions tested, alternatives are always properly researched, risks identified and benefits confirmed by post project audit?
Does your organization use an integrated Workflow platform to enable collaboration between team members and to instantly report on the completion and approval status of your capital expenditure requests – on-line ?
Does the capex software that you are presently using have auto checking functionality ? And can it be used for a variety of applications – such as buy verses lease, asset lifecycle optimization, business valuations, depreciation forecasting and the like ?
Does your organisation have well defined Tendering Procedures, with appropriate criteria for applying conditions of contract? Are you satisfied that innovative procurement practices are being applied to obtain best value from your capital expenditure programme?
Does your company have in place well designed, standard documentation for capital expenditure, including an application form, capex checklist, asset disposal and transfer authorisation, and proposal for budget inclusion?
Do you have a hurdle rate for ‘business case’ capital expenditure – one that is consistently applied on an incremental basis, and which ensures your scarce resources are effectively rationed?
If you are unsure about any of these important questions, we can provide expert assistance.
We can also develop Policy and Procedures Manuals for capital expenditure and major maintenance in ISO 9000 format, to communicate quality standards and establish accountability.
As well as making considerable cost savings, our systems streamline administrative procedures, making your staff more productive.
In many organisations, Unit Managers are given tight deadlines each year to produce a list of submissions for inclusion in the annual capital budget.
Consequently, thought is given to the ‘must do’ projects, but inadequate consideration may be given to those ‘discretionary’ profit generating projects which achieve fast paybacks through quality enhancement, innovation, cost reduction, or productivity improvement.
As capital expenditure specialists and having personally evaluated more than 5,000 major works proposals, we have the experience which is necessary to help your Managers identify projects with positive cash flows!
We have developed a framework for the systematic identification of projects with fast paybacks in both the service and manufacturing sectors.
Depending on present debt to equity ratios, it may be prudent to increase term debt to fund these projects, “at the margin.” Alternatively, extra funding may be sought from shareholders.
As an alternative to “out-sourcing” or quitting unprofitable activities, successful organisations are deliberately investing in projects which improve efficiency in these areas.
We can offer a performance guarantee that we can add value to your company… Should we be unable to initiate and implement initiatives to achieve worthwhile savings, no fees are charged!
- The involvement of different departments and agencies in the evaluation process.
- Capital investment funding requirements and how they are prioritised.
- The key information required to support justifications.
- The planning and management of successful projects, including the pitfalls to avoid.
- The application of financial criteria to projects, and the organisation’s goals as they apply to return on investment.
- Tendering procedures and other purchasing considerations.
- Asset disposal and transfer procedures.
Capex® can assist by providing “hands on” training courses which incorporate case studies, to ensure that your key people understand the implications of their decisions.
The results will be … better prepared and researched projects. These proposals will be in accord with your financial objectives as well as with your quality and business objectives.
Many of our clients have learned that by improving the standard of their capital expenditure proposals, their Boards of Directors and funding providers have become much more willing to invest capital in their businesses.
Capex® can offer expert independent assistance with “lease or buy” and asset replacement decision-making.
We can also help with project accounting, capital budgeting systems, and we independently assess opportunities to improve asset utilisation.
Other services include the assessment of the economics of undertaking activities in-house versus contracting out, rationalisation of operations, feasibility studies and assistance with the disposal of surplus assets.
We guarantee professional objectivity. We do not become involved in internal politics. We can provide specialist expertise that you could not afford to carry on your payroll.
Capex® have the skills and experience you may be seeking.
Are past costly mistakes being repeated, without your knowledge?
… Have you ever listened to great revenue enhancement or cost-saving proposals and then got to the end of the year and wondered what happened to them?
If you’re not doing post-project audits, then this could apply to your organisation.
For an objective assessment call us to arrange your complete post-project audit.
Expert assistance can also be given with project evaluations and pre-approval capex reviews.
Plan for a greater return on your organisation’s assets by contacting Capex® today.