What is the best practice for validating the realized ROI of previously approved CAPEX, specifically with respect to IT projects?

427 views2 Upvotes3 Comments

Sort By:

Oldest

Finance Analysta year ago

In organizations that I have worked in, we instituted a 12-month review process. 12-months after the CAPEX project was brought into service, a review of the business case that got it approved is performed. This includes the ROI, payback period and any assumed cost savings or revenue enhancement that was expected.

Director of Finance in Consumer Goodsa year ago

The best practice of is to check the break even and payback period of the approved Capex in order to validate the approved capex.

Please join or sign in to view more content.

By joining the Peer Community, you'll get:

Peer Discussions and Polls
One-Minute Insights
Connect with like-minded individuals

India Head and Director of Global Finance Shared Services in Hardwarea year ago

The validation or evaluation of realized Return on Investment of previously approved Capital Expenditure (CAPEX), particularly in the context of IT projects, is crucial to assess the success and effectiveness of those investments.

Please calculate the total cost of ownership and compare it to the projected benefits. This includes not only initial CAPEX but also ongoing operational costs.

Please also assess the project's Return on Investment over the long term, as IT investments can have an impact lasting over number of years. The industry best practice is to treat the useful life of an IT project is 5 years.

The validation of Return on Investment for IT CAPEX projects should be an ongoing and repetitive process that helps organizations make informed decisions about future investments and ensures that IT projects contribute positively to the organization's strategic goals.