Has your company gone through the painstakingly slow and tedious process of acquiring a new physical asset? Making sure all the correct parties approve the asset in a timely manner is tedious can be prone to error. Read the blog below to find out how to make the process easier and more efficient.
What is Capital Expenditure (CAPEX)? It is the financial resources that a company spends to purchase and maintain physical or digital assets. It may be infrastructure, buildings, vehicles, or land, but the most important concern is to receive benefit from this purchase for more than one year. Using a CAPEX Approval System will speed up the return on investment and enhance the productivity of the company.
CAPEX Approval System encapsulates the complete process from requesting the expenditure to getting it approved from the authorized hierarchy and finally procuring the asset. It drives operational growth and brings prosperity to the company.
Capital Expense Management Software solutions are increasingly being adopted in the market to automate the purchasing process. They ease the flow of cash and make the process more functional and reduce errors.
How Does the CAPEX Approval Process Work?
CAPEX approval Process is comprised of a series of tasks and approvals from multiple authorities such as account managers, stakeholders, operation heads, location leaders. Before the request is approved and the funds are released each authority must approve the investment. Weather it is an asset acquisition, renovation program, rent agreement, digital subscription, or lease management; everything must be properly explained and approved each step of the way before initiating the investment purchase.
Once the proposal is approved by all responsible parties, a cash disbursement is initiated after a cross-verification of the purpose from the hierarchical management who approved it and payment is sent to the vendor.
Why is Automation Required in CAPEX Management?
The CAPEX approval system is vital for the organization’s growth, prosperity, and complete functionality. This has been the reason that the systems need automation in the bigger picture of the business market.
Let’s analyze the reason:
Old-School CAPEX is Slow and Lethargic
When companies utilize automation and a technological empowerment system, they are able to quickly acquire new assets. Automating the CAPEX approval process will speeds up the entire process, saving time and money.
Prone to human error
The traditional model of CAPEX approval was marked with human errors. Since manual methods are vulnerable to mistakes, companies depend on a Capital Expense Management Software to automate their CAPEX approval process.
No Standard Guidelines
Since there is no standard mode of operation consistent for every industry, the CAPEX approval system is specifically automated for every company. It creates a transparent process from the initial request to procuring the asset for the company. You can set a guideline that reflects an optimized workflow for your specific business.
Three Steps for the Automated CAPEX Approval Process
CAPEX Request
This refers to the initial decision when a department recognizes the need to acquire a specific asset. They will then create a proposal for the new asset which predicts the return on investment, the magnitude of usefulness, and the tentative life of the asset. The request must mention every detail of the asset such as budget, projected savings, performance measures, etc. prior to passing it on to the leadership team for review and approval.
Approval By Authorized Team
Since the CAPEX approval system often includes a high investment asset, multiple levels of leadership typically need to be involved. With this system they can easily see all the pertinent information needed to analyse how much savings or their return on investment this particular asset will bring to the company.
Procurement
Once approved by management, a purchase order is sent to the vendor. The asset gets purchased, and the invoice gets approved, the financial team will release the payment per the vendor’s contract. The CAPEX Approval System ensures consistent and transparent control over the financial process that brings up a true picture of a financially accomplished organization.
Conclusion
The CAPEX Approval System ensures consistent and transparent control over entire process of procuring new physical or digital assets. Be it manufacturing, retail, healthcare, pharmaceutical, tourism, education, or information technology, utilizing a CAPEX system is the foremost important task for the concerned IT team.
Therefore, Microsoft Gold Partners are selling BITSCAPE’s service like a hot cake in a market that reinforces every dimension of revenue management with an automated CAPEX system.
Author Bio
Carlotta Krajcik is a Technical Consultant at a leading USA-based Company BITSCAPE where she has hands-on experience in delivering consulting services. Apart from technical things, she enjoys playing soccer with friends.
