Capital Expenditure Control


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Capital Expenditure Control

 

The control over capital expenditure is growing in importance as mechanization and automation are introduced and extended. However, formal capital budgeting is still undeveloped as it is of comparatively recent origin. Any system of capital expenditure control should have the following feature.

 

Planned development: Capital expenditure should be carefully planned to include developments in each site or department to ensure that each unit in the group or company is developing in step with the overall plan preparation of capital budget will be essential, even when companies to not operate a complete system of budgetary control. Capital appropriations and payment must be planned well in advance.

 

Control of progress: A progress record is necessary to show the progress of each capital project. The budget and actual expenditure will be compared for analysis and control. These reports are also useful to ensure that the overall programme remains within the limits set by the policy of the company.

 

Post-completion Audits: This is an important step of capital expenditure control. Post – completion audits of projects determine. Where their actual value is in accordance with the one determined at the time of authorization. This review can be very important because it may reveal inefficiencies in the system, and it would provide experience which would help in avoiding repetition of mistakes.

 

Forms and procedures: There should be a routine for controlling capital expenditure. A procedure should be adopted for the various stages requesting for capital expenditures, authorization, reporting the progress of such projects and audit. A well designed from should be used for the above purposes for better control.


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