Capital Expenditure (CAPEX) Approval workflow

Timely investments in assets and infrastructure are critical to support an organization’s growth. However, capital expenditure approvals are often protracted due to the following reasons:
1. Complex vendor selection processes including RFP submission and evaluations
2. Differences in policies based on expenditure type, location, business unit
3. Availability and access of information to budgeting systems
4. Multi-level, amount-based approvals
5. Time taken to transmit supporting documents such as vendor quotes, RFP responses, comparisons, blanket purchase orders
Risks of manual CAPEX approvals
Besides long approval cycles, manual CAPEX approvals are associated with the following risks:
1. Errors in approvals leading to approval of expenses outside the budget
2. Lack of transparency in vendor selection processes leading to collusion between vendors and internal members
3. Absence of an audit trail, especially in case of exceptions
4. Under or over utilization of budgets
5. Lack of standard and consistent application of approval policies across business units and locations

The following workflow is an example of a limit-based CAPEX approval system.
create workflow with these steps:
1. Department manager applies for approval. Selects items of capital expenditure and quantity required and period when required.
2. Workflow integrates with the ERP to check if capital expense is within the budget.
3. If the request is within budget, and amount is <> 25000, then it is forwarded to the Vice President Finance and Departmental Head. If request is outside budget, it is first forwarded to the departmental head for exception approval – see step 5.
4. If the Finance Manager and Head approve/ or VP Finance and Dept Head approve, the Purchasing workflow is initiated.
5. If Departmental Head substantiates the exception, it is forwarded to the VP-Finance for sanction and Purchasing Workflow is initiated.
Process Efficiencies with automated workflow
Process Efficiencies
1. Faster completion of approval process to ensure uninterrupted availability of critical infrastructure
2. Consistent application of approval processes
3. Clear audit trail evidenced by copies of all supporting documents, notes and comments
4. Comprehensive reporting from multiple perspectives - total sanctions, total variations from budgets, breakdown of requests by department, location, approver, requestor
5. Tighter controls at all stages to prevent collusion
6. Transparency in purchasing