How to Complete a Capex Budget

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Capex, or capital expenditures, are the lifeblood of any growing company. As operations grow, so does the need for additional capital to purchase the best and most efficient equipment. Mature companies don't need to invest in new capital, but they do need to invest in the maintenance of the capital purchased. This is why most capex budgets provide a certain amount for new capital expenditures and old capital expenditures. The challenge is getting everyone to agree on the best combination.

Obtain the budget from the previous year. Request this from the company's financial analyst or controller.

Identify the difference between the capex budget for maintenance and the capex budget to purchase new capital. Companies in expansion or growth are usually using profits to purchase new capex, whereas mature companies may be primarily focused on a maintenance capex budget. Most companies have a combination of both.

 

Request input from all department heads on new capex spending requested. Advise department heads to rate the need for the spending and the relative payoff of the request.

 

Complete the capex budget. Combine requests that meet financial acceptance for both maintenance capex (which are usually requirements) and new requests.

 

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About the Author

James Collins has worked as a freelance writer since 2005. His work appears online, focusing on business and financial topics. He holds a Bachelor of Science in horticulture science from Pennsylvania State University.

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