Capital expenditure, or CapEx, is made up of the money that an organization spends buying, replacing, or upgrading its fixed assets, like land, buildings, vehicles, and equipment.
Spending on this category of assets is important for the survival and growth of any corporate entity with substantial physical assets. Without capex, an organization’s assets will fall into decay and waste away. However, capital expenses are by nature high-cost investments. Therefore, as a business owner, you’ll need to track capex projects closely to avoid a serious budget overrun and the financial drain that comes with it.
If you’ve faced this kind of problem in the past, or you’re currently struggling with controlling costs on your capex projects, you’ll need to read on and discover how maintenance software can help you recover.
What’s Your CapEx Plan?
A fundamental cause of problems with capex projects is wrong estimation; either the expenses are under or overestimated. This error can potentially impact the entire project and even lead to project abandonment. The risks and huge amount of money usually involved make it prudent that you plan and budget for capital expenditure thoroughly.
CapEx planning will be simple or complicated depending on different factors, but generally, preparing a capex plan requires that you do the following:
- Identify the line items (roofing, pumps, vehicles, etc), prioritize them, and understand the costs involved for each one.
- Evaluate the time estimate for getting a return on the investment based on the useful life of the asset.
- Establish a proposal and approval process.
How Does A CMMS Help With Managing CapEX Projects?
A CMMS will help you with managing capex projects right from the budget planning stage.
Start by identifying which items will be included in the capex budget for the year. This will require physical inspection of the assets and reviewing the data and equipment history in your CMMS.
For instance, let’s say that your service technicians have noticed that an air conditioning unit is requiring more and more maintenance than normal. Your CMMS records show that this aircon has been working for 10 years or more.
By analyzing this information further, you may find proof that it’s no longer economically wise to keep repairing it. Rather, you choose to replace it with a modern model. You have identified one of the line items for your capex budget. You can carry out this same exercise on other components such as lighting, roofs, manufacturing equipment, and so on.
A word of caution – be careful to specify and keep to the capital spending ceiling. That’s the maximum amount your organization wants to commit to capex projects for that financial year. Also, it’s likely that some capex projects will have to be moved to the next year due to unforeseen circumstances like unfavorable market conditions or financial constraints.
Again, a CMMS will help you to create and manage preventive maintenance programs that will allow you to use those assets a little longer and give you some time to get the required money.
Optimize Your CapEX projects With Axxerion CMMS
Using our best-in-class CMMS gives you several advantages for managing capex projects. For one thing, our CMMS integrates easily and seamlessly with other enterprise software. This enables a quicker, easier, and more transparent approval and input process. Other departments (e.g. accounting) can easily make recommendations and everything is updated in real-time. This prevents duplication of data and communication problems.
You can also customize many other modules to suit your maintenance and project management needs. Sign up for a free demo today!Free DemoFree Demo