Capital Expenditure Planning
A Perficient Strategic Position
July 24, 2023
Navigating the Art and Science of Capital Expenditure Planning
What Is Capital Expenditure Planning?
Capital expenditure planning is how businesses decide where to re-invest and allocate capital to generate superior returns and create shareholder value.
Poor capital planning processes produce questionable outcomes because evaluation criteria are not consistently applied or enforced.
In today's inflationary business landscape, using funds for capital expenditures requires a cautious posture. Optimizing how well capital is planned and allocated is a crucial driver of shareholder value and competitive advantage. It's part art and part science, and a complex process to master in the office of finance. The science may be straightforward; however, the art is in navigating the politics and competing initiatives.
Achieving the desired returns on investment and impact from capital expenditures requires a well-orchestrated and governed process. While the capital expenditure planning process is a subset of overall financial planning, organizations often need more explicit guidelines, governance, and visibility to the capital process. They often know their capital spend, but do not have visibility into ROI or if targeted returns are being achieved.