In preparation for the first quarterly board meeting of the year, CFOs and their teams must be prepared to inform the board on the current financial state of the business and ensure that they have the needed data to make accurate and timely decisions. The office of finance provides clear financial reports – from cash flow and income statements to balance sheets and OpEx analysis – to assist them. The board may have different focuses throughout the year, but one area that should be considered during quarterly meetings is capital expenditures. A capex report is an important tool in keeping the business on track with its strategic goals for the year. This report can bring the CFO and the board closer together for better alignment of company activities with goals.
The Board’s Capital Expenditures Role
As the board of directors gets ready to gather for the first big decision point of the year, the first quarterly board meeting, finance teams are working hard to get them the data needed to guide the organization.
The board has a number of important tasks before them, but two drivers, in particular, should direct their questions and decisions – what will ensure that the company meets its strategic goals and growth plans, and how do we ensure a solid return on investment to shareholders.
Understanding the business’s capital expenditures – or capex – is one of the tools that the board should review closely to accomplish these goals. With a view of the company’s overall strategic vision and roadmap, the board should look closely at the intended capital asset purchases for the year, those planned, and new requests or opportunities for fixed assets that may arise that would leverage some of the cash currently being held by a business.
Intended and completed purchases of capital expenses, like physical assets, improvements to owned real estate, a needed piece of equipment, should be aligned with a company’s strategic vision for the next year and in the context of a longer five-year roadmap or plan. The capex report gives board members a view of where a company stands when it comes to buying short-term or long-term assets and the rest of the company’s forecast and working capital.
An audit committee on the board can deep dive into these numbers to take back to their peers. But it’s the CFO’s team that puts together the data for the committee to access and review, and their responsibility to provide accurate and timely reports, data, and financial statements for their review.
How Finance Teams Support the Board with Capex
The audit committee, and the greater board, will have some important questions around capital expenditures. Things like “How available is capital for short and long term projects? What are the controls on unplanned capital expenditures? How are they prioritized? Are there departments or leaders that take the largest chunk of capital, and is that the right place for it?
Finance teams should be prepared to answer these questions if not directly than through reports and dashboards that the CFO and audit committee can use to inform the board on the company’s current performance against forecasted expenditures and income.
Creating a set of dashboards for the committee to review that includes capex, operating expenses, cash flow statement data, and so on, can prepare them to help answer the questions that the board might have, as well as their own. Tools like these, plus comprehensive and accurate capex reports, frame the company’s financial position correctly for the board.
Creating powerful, accurate, and dynamic capital expenditure reports and dashboards in a timely manner is challenging, however, for finance teams that continue to do this work manually or using software like Excel instead of an FP&A package purpose-built for the creation and automation of reporting. With a modern FP&A toolset, finance teams can quickly and easily keep the audit team, and the board, informed on capex and the other pertinent data surrounding it.
Centage Corporation’s Planning Maestro is a cloud-native planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. For more information on how to modernize your office of finance with intelligent planning, view our product demonstration video, or call 800-366-5111.