Capital expenditure controlling refers to the actions, processes and tools used to identify, forecast, assess, decide and manage capital expenditure. Capital expenditure can be used to replace or expand existing plant and equipment, to invest in new equipment or to make use of strategic opportunities in new production or market contexts. It can be used on tangible or intangible, financial or current assets. In the broader sense capital expenditure controlling is also applied to expenditure incurred in the context of campaigns or projects typical for areas such as marketing or research & development.
Several aims are pursued through capital expenditure controlling. It supports the evaluation of alternative investments and makes use of quantitative and qualitative decision criteria to optimally allocate funds to alternative investment options in accordance with strategic requirements. An important component of such allocation optimisation is portfolio management that takes into account exogenous and endogenous factors which influence the various portfolio elements and investment opportunities, as well as the links between them.
At the level of individual investments capital expenditure controlling provides indications about adaptation measures and coordinates the long-term planning of machine and human resources in coordination with sales and production planning. Ideally, investments should be tracked for their entire life cycles, i.e. before, during and after implementation, in order to learn from changes in the environment as well as from experiences made during implementation, thereby creating a better foundation for later decisions.
Scarce financial resources and increasing environmental uncertainty require efficient and holistic capital expenditure controlling. Steps have to be taken to ensure that only value-creating investments are made and that scarce resources are allocated appropriately to company divisions and business units. This means that investment projects have to be tracked comprehensively and in a process-oriented fashion from budgeting through to follow-up. Not least, efficient capital expenditure controlling requires consistent and effective management of committees throughout the corporate group as a whole.