To control capital plans, regular forecasting of capital budgets is necessary but needn’t be micro managed like revenue budgets
For any organisation, typical high level capital budgets need only show:
- Already sanctioned major named* projects and forecasted remaining spend in the current financial year and future years (with project end dates)
- Major named projects to be submitted for sanction in the current year with forecasted spend in the current year and future years (with project start and end dates)
- Expected spend per year for functional departmental improvement capex’s (minor projects)
*minimum Capex amount for named projects to be set by the organisation depending on risk and significance to the overall budget
This should be enough for most Finance Directors but it always amazed me how much minor details Finance colleagues needed to be micro modelled and updated monthly (treating it like revenue rather than capital) for example:
- Monthly spends for all projects in the current year – major and minor. I understand this is needed for cashflow but do it only for major named projects (project managers will have this data) and estimate an ongoing overall sum for minor projects based on minor Capex’s approved to date
- End dates for all projects in the current year – major and minor. I understand this is needed for depreciation modelling (revenue impact) but do it only for major projects and use the end of year actual spend for minor projects?
However I can only give a Project Manager’s view on this as I am not sure how much of the modelling is tied to accounting rules and audits etc
