The Capital Budgeting Tool for Accounting Managers

Before

You need a copy of every approved capital budget and every invoice for each capital budget. You also need to track multiple details such as the budgeted amounts and the dates the equipment was placed in service.

Once the equipment is placed in service, you create one asset for each piece of equipment – which typically means 2-3 assets for each budget. You have a press, conveyors and a temperature control unit. If any of these items was used and refurbished, you need to capture the cost to refurbish them.

You are dependent on users that create purchase orders to write the capital budget number on each PO. All of the items being purchased are posted to one GL account. You monitor the GL account, asking AP to pull and copy  invoices so that you have them for the asset file.

From there you create a spreadsheet. You list each budget and all the PO’s that are generated including the line item detail. You then list all the invoices for each of the PO’s. You assign asset numbers to each asset, and then begin the depreciation process.

At the same time, you are tracking:

• all of the assets placed in service within a period.
• assets that you use as collateral for borrowing power with the bank
• assets that were used specifically for a single project/part number so that they can be disposed of at the end of a 4 year manufacturing timespan
• what plant assets are located in. Presses and jobs may be relocated to make them the most cost efficient.

This is difficult to manage in a company that is buying $65M worth of equipment each year. You need to capture and identify each piece of equipment that is over $500 in value.

AFTER

“I finally have a tool that links the entire transaction together – all the way from the capital budget to the requisition, the PO, the invoice, the payment and the asset number.”

Typically you have a set of files or a drive where the capital budget information is kept. This information is not stored with the invoice transaction. The same is true for the asset number. This would likely be in a capitalization tool or spreadsheet. Rillion provides fields for this data and any other details that you need linked.

In an audit situation, you are provided with a list of capital projects by the auditors. Not a problem — you have links to every piece of the transaction, including approvals and comments. This is both an auditing benefit as well as a capitalization benefit.

This series is excerpted from our Whitepaper on the Benefits of Purchase to Pay.