Individual Investments or Projects? | Blog Series Part 6

[Blog Article | Reading Time: 2 mins] Part 6 of our blog series examines the question of how investments can be meaningfully bundled in the investment process. And what advantages this offers for controlling and project managers. When applying for investments, project managers face the challenge that they rarely apply for a single investment. In most cases, investments are related to each other and form projects. However, the application process often cannot reflect this. Therefore, the project manager has to apply for individual investments, for example a single drum. This not only leads to problems, but also deprives all those involved of valuable advantages.

Projects consist of several investments

If you cannot combine individual investments into common items such as projects, budget buckets or collective investments, this is a stumbling block at the approval stage. For example, approvers may reject individual investments in projects because they are unaware of the assignments to the projects and therefore cannot recognize which investments belong to which project. If the approver rejects such an investment, the complete project may come to a stop. In addition, controlling has no insight into the planned total of a project and the controlling employees must manually add up the costs of the individual investments.

Do the costs remain within reasonable limits?

The fact that project managers and controlling not only work with individual investments, but also with projects, results in a great advantage for the downstream investment controlling. This is because you inevitably need to monitor the total costs of a project. If, in addition to the costs of each individual investment, a project manager always has an eye on the total costs of his project, this offers him a powerful instrument.

At the same time, controlling masters one of its biggest challenges in investment controlling: the correspondence between the planned investment projects and the investments actually carried out later. The central question: Have the projects remained within the budget or have they been more expensive?

The challenge with this question does not refer to individual investments like a single drum. Price and total investment amount are usually relatively clear right from the start. Deviations between plan and reality are not significant in the overall budget for investments. The challenge is the projects. For them, exact costs are very difficult due to uncertainties and unforeseen expenditures.

For accounting reasons, it is also important to proceed in an orderly fashion when applying for several acquisitions within projects. The asset has a capitalization date and therefore a start time for depreciation – even if the individual parts have different asset numbers.

Conclusion

Project managers as well as controlling and management benefit most when investment planning is not only based on individual investments, but also on projects. Unfortunately, this approach is not technically easy to implement, especially in self-built solutions. Professional solutions, on the other hand, usually offer possibilities. A popular approach is, for example, the provision of a “header” for collective investments. At first glance, it is clear which projects are involved, and the individual investments can be easily viewed by manually unfolding them.

A new part of the blog series will be published every week until October.

Already published:
Part 1: Simple CapEx Planning
Part 2: CapEx Planning with Excel?
Part 3: On the Way to the Perfect CapEx Plan
Part 4: Intrayear Forecast – Always Know the Score
Part 5: Budget Allowance, or Make a Wish?
Part 6: Individual Investments or Projects?

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