When asked to describe challenges with their Capital Expenditure Management process most business users talk about the lack of integrated Capital Expenditure Request (CER) or Authorization for Expenditure (AFE) forms.
For those seeking funding, the primary frustrations are delays in the approval process, difficulty in completing the templates, and the lack of transparency in the evaluation criteria when requests are rejected.
For process administrators, the primary concerns are the effort expended in validating requests, expediting approvals, reconciling to budget, rekeying of data, and effort in producing reliable reports.
For executive decision makers, the primary objections relate to the quality of information presented, accessibility of the supporting documentation, fear of approving bad projects, and fear of missing out of better projects that are potentially in the pipeline.
For many organizations, the root cause of these challenges is the fact that their current non integrated Capital Expenditure Request process was designed primarily to support the approval workflow and collection of signatures, without sufficient integration to preceding or subsequent business processes and systems. Nestled between the core business processes of capital project planning and project execution, the Capex approval is isolated and reliant on human glue to complete, as illustrated below:
Fully Digitalize your Capex Form
The first step is to ensure that your integrated Capital Expenditure Request form and approval process is itself fully automated. Some organizations have simply replaced a paper version of the old CER/AFE form with an electronic version. Financial details are still in spreadsheets, with outputs transcribed into pdf documents for approval. Approvers and the approval workflow remain manually determined and administered. Physical signatures are replaced with digital signatures, but not much has really changed.
The modern integrated capital expenditure request form should be much easier and more efficient to complete. The form should know who you are, and which department you work in to eliminate the need for any self-identification fields. The form should be dynamic to your scenario: for example, if you are requesting urgent replacement of critical equipment the form entry fields should be much simpler than initiating a project to develop a new product line. All required entries should be fully validated to ensure high quality submissions. And where practical, attachments should be replaced with in-form completion including integrated financial analysis and project scoring and ranking templates.
Automate Workflow Routing in Accordance with your Delegation of Authority Policy
Modern Capex workflows should be fully automated. Appropriate reviewers, endorsers and approvers should be automatically determined by request attributes including investment reason, asset type and value. The approval sequence should be appropriate to decision making and make use of parallel approvals to accelerate throughput. Automated reminders and escalations should be triggered. Delegations should be easily set and applied. Approvers should be able to readily access their assigned task wherever and however they choose, including on desktop, tablet, and mobile devices.
Many generic workflow solutions such as legacy Lotus Notes or SharePoint power apps deliver many of these integrated capital expenditure request form and workflow features. However, most of them fail to integrate with your upstream budget and downstream project executions systems; thus integrated capital expenditure request forms would intertwine these components together.
Integrate to Capital Project Planning and Budgeting
The objective of capital budgeting is to identify candidate projects and select the optimal capital project portfolio within resource and funding constraints. To achieve this, most capital budgets are based on a list of proposed projects. To make the budgeted project list, a level of project definition and estimation will have already be conducted. Therefore, when raising integrated an integrated Capital Expenditure Request, it should be possible to reference the budgeted initiative details, and supplement and refine only as required.
Furthermore, the integrated capital expenditure request process is not merely a repetition of prior efforts but rather a stage where any necessary adjustments, refinements, or supplementary details are incorporated. It’s a pivotal moment for fine-tuning and optimizing the project proposal, aligning it more closely with the overarching strategic objectives and the available resources. This iterative process ensures that the selected projects are not only feasible within the given constraints but also offer the highest potential for delivering value to the organization.
In essence, capital budgeting, when approached methodically and with a focus on integrated capital expenditure request forms, allows organizations to strike a delicate balance between their investment ambitions and the realities of their financial resources. It transforms the process of project selection into a well-informed, dynamic, and adaptable exercise, ultimately leading to the creation of a capital project portfolio that aligns seamlessly with the organization’s strategic vision and financial capabilities.
Integrate to Capital Project Execution System
The project execution phase includes the procurement of goods and services within approved budget constraints that become assets to the organization. The classification, structure, and budget of the projects within SAP should be defined in the integrated capital expenditure request. On final approval, Projects or Internal Orders should be automatically created in SAP to allow projects to quickly commence without waiting for further project set-up forms to be completed and manually set-up in SAP.
Apply the Appropriate Technology Platform
For SAP customers, there are two options available for delivering an integrated Capital Expenditure Request solution:
- Apply SAP Business Technology Platform Technology – If all entities in your organization run SAP, and SAP is likely to be your future digital core, and if you have highly unique Capital Expenditure management requirements, an SAP-based solution is most likely to be optimal. Leveraging SAP Investment Management capabilities, capital investment program budgets can be maintained within SAP. Using SAP Appropriation Request functionality, initiatives can be assessed and planned prior to project creation and budgeting. With Fiori, all participants can access a centralized application launchpad for all steps in the business process. Fiori apps are web and mobile enabled, presenting a much-improved end-user experience to the traditional SAP GUI. And Fiori apps can be used today even if you are on an earlier version of SAP. Fortunately, Fiori apps deployed today will still work seamlessly after your S/4HANA migration. The IQX Investment Management suite of Fiori apps provide a ready-to-run suite of Fiori apps for investment management that can be readily to your unique integrated capital expenditure request form, workflow and integration requirements.
- Adopt a SaaS Solution – If not all entities in your organization run SAP and if you don’t currently make use of SAP Investment Management, then a Software as a Service (SaaS) solution may be most appropriate. The Stratex Online solution provides a seamless project planning, budgeting and approval solution that is then directly integrated to SAP for project execution. Whilst the project planning activities are supported by a modern, globally accessible, and highly configurable SaaS solution, downstream project execution processes leverage SAP Fiori for project creation, forecasting, and completion.
The full suite of IQX Project Procurement and Asset Management Fiori apps are available irrespective of your choice regarding integrated capital expenditure request and approval technology.
Benefits of an Integrated Capital Expenditure Request Form
The business benefits of integrated capital expenditure request forms for your budgeting and execution systems include:
A key goal of digitalizing and integrating your capex request forms is to reduce the time taken to get urgent and important projects initiated. By integrating with your budgeting and planning system, requesters will only need to supply supplementary information, administrators will not be required to look-up and validate budget availability and executive approvers will have confidence in the quality and reliability of information presented. Consequently, gaps and delays in the process can be eliminated.
Human glue is messy, error prone and annoying. It sucks up time in rekeying data, administration, and rework. Time that could have been much more productively preparing effective financial analyses, optimizing the project portfolio, and monitoring project performance. Thereby, integrated capital expenditure request forms will ensure increased productivity.
Enabling traceability of an initiative all the way from idea to operative asset is essential to ensure that the capital expenditure budget is wisely invested. Where systems are in silos and the originating budget allocations cannot be effectively related to final assets produced, there is an inherent risk that initiators are not held accountable for project outcomes that may diverge from business case promises. By contrast, progressing initiatives transparently through each project stage from inception to active asset ensures that investment reasons and justifications are respected and validated, mistakes are learned from, and accountabilities enforced to ensure effective capital allocation, for both current and future projects.
Controls are only as good as their weakest link. The more disconnects, the more re-keying, the more systems involved the greater the chance of fraud, error or unauthorized disclosure occurring. The longer it takes to produce budget reconciliation or project performance reports, the greater the risk of adverse outcomes occurring. By directly connecting Capex requests with planning and project execution in a seamless process flow, manual errors can be eliminated, and monitoring and control can be applied in real-time to allow mitigating and corrective actions to occur.
The Solution for Integrated Capital Expenditure Request Forms and Accelerated Workflow
Stand-alone Capital Expenditure Request forms can largely achieve the goal of obtaining executive approvals when specialist workflow systems are used. However, the lack of an integrated Capital Expenditure Request Form solution for planning and execution processes causes significant inefficiency, risk and frustration to key participants including busy senior executives. Embracing integrated capital expenditure request forms is a strategic move that can bring numerous benefits to organizations. By streamlining the process and leveraging the power of collaboration and data integration, businesses can enhance their decision-making capabilities, improve financial planning, and ultimately achieve greater efficiency in resource allocation.
Integration with your capital budgeting process ensures that all participants are aware of variations away from the planned project portfolio, and that such a diversion is justified. Integration with your SAP system ensures that project execution is expedited and effectively controlled.
IQX Capital Expenditure Management for SAP supports a seamless business process from idea to asset. Key business benefits beyond integrated capital expenditure request forms include better business decisions, improved speed and productivity of your team, and enhanced governance and control.