Capital Planning: A beginners guide to understanding the basics

Capital Planning: A beginners guide to understanding the basics

Just like yearly budgets, goal planning and employee reviews, planning and management of the capital plan should occur in a regular, annual cycle. But first, let’s talk about capital plan management basics. There are various tools, processes and team players to understand before beginning the capital planning process.

Capital request form—The form used to standardize the necessary information for each project so that the planning group can vet the project.

Capital project drivers—Every company has different drivers, but the common drivers are typically growth, obsolescence, regulatory, strategic/alignment to goals and cost avoidance/reduction.

Capital planning group—Group responsible for management, including vetting the list of proposed capital projects, prioritizing and reprioritizing the capital, seeking capital management committee approval and managing the ongoing changes.

Capital management committee—The governance committee responsible for approving the group’s proposed funding and spending plan.

Capital project approval process—This process is typically company specific and includes all approval requirements, stage gates, etc. to ensure cost, schedule and budget control and conformance.

Minor versus major capital—Every company has its own unique delineation, but these usually entail different approval processes: Minor capital has fewer approvals, and major capital has more approvals.

Operating (routine) capital versus new capital—A company may choose to have a bulk approval process for operating capital (a bunch of smaller lower dollar projects) and not require these projects to be individually approved.

Finance—Has membership on both the capital planning group and the capital management committee and is the approver of capital funds.

Management programs—There are a handful of management programs, including Attainia, FINARIO and Accruent, that can provide the management platform for your needs.

Facility manager—Has the responsibility for capital plan management for the company or the company’s site.

Business unit leaders—The leaders of the operating groups who sit on the capital management committee.

Monthly variance report—Issued to gain actionable visibility of the plan and to keep management and stakeholders informed.

Monthly capital expenditures report—Issued by the finance to keep members, management and stakeholders in the loop.

The list can go on and on, but suffice it to say, there are quite a few tools and processes that are essential for keeping the process running throughout the year. Additionally, we’ve compiled a list with a complete breakdown of planning activities by season to help with your annual planning efforts.

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