Financial Justification: Develop Capital-Budgeting Policies

By Bruce Wesner  
OTHER PARTS OF THIS ARTICLEPt. 1: Big-Ticket Purchases: Financial JustificationPt. 2: Capital Investments: Review, Evaluate Historical PerformancePt. 3: This Page

Submitting appropriate financial justification for investments in big-ticket capital acquisitions is an essential step, so managers should require it and prohibit any exceptions. Managers can help supervisors and front-line technicians understand the reasons for required financial justification, as well as the way a more disciplined process will benefit them and the company's overall performance.

World-class companies require capital-budgeting policies, and required governance and internal control processes help ensure investment decisions are financially justified and properly analyzed. These policies also ensure efficient use of a company's most treasured asset — its cash.

Now is the time for managers to take a fresh look at their organizations' processes for evaluating new capital investments. They can reach out to peer networks for examples of good capital-acquisition procedures and find an example that fits a company's culture.

Finally, managers can work with the organization's leadership team to implement a new system for big-ticket capital acquisition. To ensure the new system works effectively, they also need to pay attention to the people side of this change. An effective change-management plan is an essential step in achieving this goal.

Bruce Wesner is a managing principal with Life Cycle Engineering. He has more than 25 years of maintenance, engineering and management experience.

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Big-Ticket Purchases: Financial Justification

Capital Investments: Review, Evaluate Historical Performance

Financial Justification: Develop Capital-Budgeting Policies

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  posted on 10/1/2010   Article Use Policy

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