Capital expenditures are very poorly managed in most companies. It's like every company has a "capital expenditures back door" that is left open and seldom monitored. The result is a big drain on your cash flow.
Step 1 to fixing the problem is to create a written Capital Expenditure Plan.
I like to keep the plan very simple and straightforward. Even with its simplicity it provides a number of important benefits.
- It gets your management team thinking about capital expenditures before the year begins
- It puts a focus on the cash to be used for capital expenditures
- It lets everyone know you are paying attention (that's half the battle)
- It makes it easy to compare actual expenditures during the year so you can see how the plan is unfolding
- When someone wants to buy something they have to explain how it fits into the plan
I wrote an article at The Business Bank of Texas to help you get this component of your cash flow under control.
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