On the Way to the Perfect CapEx Plan | Blog Series Part 3

CapEx Plan

[Blog Article | Reading Time: 3 mins] In part 3 of our blog series, we take a look at the various sub-processes of investment planning. Until an investment project reaches the final CapEx plan and becomes an order, the application runs through a number of processes. Apparently, the most successful planning processes are of a simple structure. This way, not only controllers, but also end users – in our case, the employees applying for investments in the divisions and plants – can understand them.

Release and retrieve budgets

It turns out, the project up to the CapEx plan is anything but complex: First, the organizational units (divisions, plants, companies, etc.) should define their investment projects for the next year or years. Management prioritizes, then releases them according to the (planned) financial resources, cuts them or rejects them. The released budgets are now in the CapEx plan. You can retrieve them in larger or smaller amounts in the corresponding year. This means that purchase orders are executed.

Controlling wants cash flow planning and a neat forecast for this retrieval. Cash flow planning ensures liquidity and, thanks to the forecast, you can react to possible postponements. In addition, there may be so-called “cutback rounds”, due to predicted negative economic developments. In short, the path to a CapEx plan is nothing you couldn’t explain to every employee in the company.

Where does the confusion on the way to the perfect CapEx plan come from?

For various reasons, most companies do not carry out all the processes described above and thus – consciously or unconsciously – deprive themselves of efficiency, accuracy and ease of work. This is often due to historical processes (“We have always done it this way”) and missing possibilities, (“This is not possible with our current infrastructure”).

A classic example is forecasting. It should be extremely helpful for controlling. But since you’ve never asked for a forecast before, and the current infrastructure cannot include any up-to-date figures (How much money has already flowed?), controlling has to do without it.

But if the whole project is so easy to explain, why can’t we realize it in simple processes? We can.

The power of the two stages

In order to structure the CapEx process, two essential sub-processes for both users and controllers are sufficient: operational planning and retrieval. In operational planning, a CapEx plan collects (and releases) and summarizes the investments planned for the next few years. The task of the retrieval is to retrieve the released budgets and to convert them into purchase orders.

Operational Planning

Everyone in controlling or management strives to know the planned CapEx for the next year as precisely as possible. No matter how much you expand the business terms, investments belong to the cost type expenses (investment costs). Thus, they have a direct influence on the company’s results. Management wants to know the results of the next business year as precisely as possible in order to be able to prepare entrepreneurial decisions. This way, a company can be managed in a strategically and operationally healthy way. Every company should therefore use this way of planning, because it leads to a very precise CapEx plan. The result is a significant economic advantage.


Although the retrieval sub-process has various advantages, many companies neglect it. The most common reason: The CapEx plan is drawn up after the operational planning and passed to the strategic corporate planning. But to think that the matter is closed is incorrect, because a working process for placing an order is of the same importance for all people involved. That is for the following three reasons:

  • The retrieval provides users with optimum support, as it enables them to act independently within their budgets. They are, for example, able to react autonomously to postponements. This not only makes users happy because they do do not have to contact controlling with every change, but also relieves controlling, which now only has to intervene in emergencies or in the event of non-observance.
  • Controlling can use the retrieval simultaneously as cash flow, planning and forecasting – in case of clever data retrieval. The advantages of a forecast in CapEx planning will be described in more detail later in the blog series.
  • You can trigger an order directly from the retrieval in the corresponding order program (e.g. SAP ERP). You can also retrieve all data relevant for the order during the retrieval process. This saves an immense amount of time and effort.


The two sub-processes operative planning and retrieval form the optimal initial position to collect all necessary data on the way to the CapEx plan and to carry out the necessary activities. From there it is only a stone’s throw to forecasting, cash flow planning and even automatic order triggering.


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