A Capital expenditure approval process (CapEx) is accounting method to allowing to increasing capitals in organization. The capital expenditure can be for equipment, machinery, and / or property purchases. It is long-term beneficial expenditure that stately increase the capability of manufacturing facility.
Introduction to CapEx
The capital expenditure approval process normally manage by accounting department. The accounting team prepare the documentations for final approvals from the management. This is the one of the important expenditure that may long-term beneficial. It may directly making positive affects to the existing product flows, and production capacity.
The process start form the user department. Department head is sending the request for the goods that require for the manufacturing or supporting processes. The accounting team understand the requirements, and send these request to management for further actions. Management will be verify the requirements, and approval if is really helpful and essential for facility.
What to include in policy for CapEx
- Including the limitations for the capital expenditure for each department, or overall business.
- Make the necessary to fill out capital expenditure request form before purchase order can be place to vendor.
- In case of self constructive assets, make the estimations or actual cost should not exceed the limits of cost.
- Create the specific method for data processing and approvals
- Fix the procedure for each department including budget
- Make the necessary to include details of return on investments in request form
- Describe the frequency of audit, post audit to evaluate actual against projected savings.
- Essential requirements such cost, contract price, discounts, freight, assembly installation and testing costs.
- Include in policy for costs subsequent to acquisitions.
- One of the important point is capitalization of interest is also specifically describes and make the sufficient policy.
Process flow of CapEx
When any department having the requirements of materials, tools, machinery or equipment that it making requirement form. They will provide this form to procurement team. But some goods and materials authority are limited if the material values are higher that procurement team limits. So, mostly in capital goods values that not authorize to procuring that needs to manage special requirements is capital expenditure approval documents.
Hence the procurement team is conducting process of capital materials requirements. They will generating necessary documents and conduct processes. In the process of capital expenditure approvals, they are making a form and fill out. After than they will sending to account for approvals.
Accounting team is receiving capital materials requirements and budgeting / costing the capital expenditure values. With the form budget values in the document sending to management for further actions. On at receiving the documents at management team, that the management peoples are discuss on the capital materials requirements. Even they will be makes a priority & necessity management approval or reject the applications.
When the approvals are done that accounting team sending return to procurement team with approval letter that procurement team is conducting further inquiries. The inquiry of capital goods or as requirements of general process for procurement.
Capital Expenditure approval form
The capital expenditure approval process is manage in the sequences, as other materials. But the some extra documentation are require to manage the tasks. Because of capital materials values and its authority are manage on approvals of management. Generally we can see these may standard practice in any organization.
The capital expenditure approval process is simple approvals system that manage by accounting team. They will calculate values of capital goods requirements and manage format in expenditure costs. In format that management get the idea how much values are needs for procuring processes. On values and requirements further actions are taken.
See picture below given as example format of capital expenditure approval form. Which is manage by accounting team and submit to management for further actions. Below picture provided for education purpose:
More about Capital expenditure approval form format
Capital expenditure approval form format is use to recording information, calculated estimation values of capital requirements. The format is manage by accounting team for expenditure approvals from management. In the capital expenditure approval form all the necessary details are needs to mention, which are generally concern with accounting. Like account code of capital goods, for which operation or tasks the capital materials are required.
Some importance of tasks or operation that conduct in unit, location / area name where installation of capital materials, description of requirements, budgets values and its concern calculations etc.,
Information are important for management to acknowledge the requirements. As well filled this format is submit to management for approvals. Management team is verify the requirements, operation and tasks importance and condition of unit are factors for approvals. They can also rejects the applications, if the specific conditions. Such as require factors, condition, situation of financial and other major importance are consider.
In short the capital expenditure approval form is important for end user to management that all the details are shared and managed in the form for capital procurement process. The documentation update, maintain, storage and disposal is managed as per documentation system.
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Capital expenditure approval form
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