CapEx as Part of Maintenance Management

When it comes to managing all aspects of maintenance, capital expenditures remain one of the key priorities. FirstService Residential, one of the leading residential property management companies in North America, explains that capital expenditures (CapEx) or improvements may be needed “to increase an asset’s useful function or service capacity, [such as through the installation of] variable frequency drives on cooling tower motors, [upgrades] to energy efficient lighting, or any other major, value-adding improvements.” The approaches to tracking, updating, and reporting on CapEx can vary greatly from organization to organization: accounting or ERP systems, project management software, homegrown systems, and even spreadsheets. For a maintenance responsibility that impacts the effectiveness of critical assets and equipment, the ongoing management of maintenance CapEx should require more than these improvised options typically found today.

Consolidate to Succeed

The most obvious answer is to, first, stop using any programs that aren’t performing as needed. If maintenance teams are juggling multiple systems or creating their own methodologies to wrangle CapEx information, take a step back. In its essence, CapEx is a form of project management – but it’s more than that, as it impacts assets from the general ledger that are routinely maintained and relied upon for production. Before adding another step or software to the mix, look inward to your CMMS or EAM solution.

Your CMMS already serves as your asset’s “system of record.” All asset numbers, conditions, locations, statuses, criticality, model, related parts and purchases, safety procedures and inspections, documentation, reports, and more are accessible within this solution. By utilizing this inherent data in conjunction with the CMMS’ workflow capabilities, maintenance can follow corporate CapEx business processes in an efficient and effective fashion.

The power of using an advanced CMMS for major expenditure tracking comes from the fact that each employee can have access to their relevant parts of the process.

Configuring the Process

Let’s say that all non-major investments greater than 3,000 USD must go through a Capital Authorization Request Policy. Each request must be routed through several layers of approvers, including the business unit manager, IT and Supply Chain Directors, and the Vice President of Finance. For non-major investments of 50,000 USD and above, there is an additional approval layer that includes the CFO.

Now let’s say that a piece of equipment presents a safety risk to personnel, which has been ascertained based on safety reports compiled in your CMMS. It has a replacement cost of 75,000 USD. The CapEx project may be created within the CMMS with a number of required or optional attributes, such as:

• Project ID or number
• Priority
• Status
• Related Site or Cost Center
• Total Budget
• Total Cost
• Origination Date
• Description

From there, the approval workflow may be defined based on project stage and the order in which each approval must be received. The CapEx project may be assigned to particular users, perhaps the maintenance manager and the business unit manager, for accountability and ownership. Economic analysis and justification files, quotes, warranties, and other documentation can be added at any point during the process.

Throughout the project, the maintenance manager may associate work orders for disposal work related to the unsafe equipment, as an example. Relevant purchase orders for parts and service/installation work may be included, as well as audit and inspection programs to ensure that the new equipment adheres to the same (or more rigorous) standards as the replaced equipment, for instance, or meets project objectives through a post-completion audit. Finally, a log of user activity and approval status is tracked for full visibility into project modifications and authorizations.

Executing a CapEx project without the unifying force of a modern CMMS is technically possible – but not necessarily the easiest or most productive way. CMMS integration with other systems, such as ERP or accounting software, can reduce or eliminate duplicate data entry and communication issues, while ensuring corporate policies remain in effect consistently throughout an organization. Perhaps most important, CMMS with CapEx capabilities give another opportunity to bring teams closer through various Specialized Users roles – from finance and IT roles to business unit managers and supply chain personnel. Greater user access across one CMMS platform can save time and effort while preventing errors and mismanagement. In fact, the Project Management Institute credits highly effective communicators with projects delivered on time and within budget. When it comes to capital expenditures, a well-designed CMMS can position your team for project success.

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