Alternative asset depreciation schedules may be modeled against each other

Description

For this requirement, we are specifying that the system allows what-if scenarios to be created specific to Capital Asset Planning which allows the user to have one scenario with one method, a second scenario with another, and the ability to put them side by side over time to see the impact on financials.

Example Use Case

Scenario: A mid-market manufacturing company with an extensive portfolio of machinery and equipment is planning its annual budget. The CPM software they're using provides a comprehensive view of all their capital assets.

Solution: The company uses Capital Asset Planning in the CPM software to model alternative depreciation schedules. They compare linear and reducing balance methods of depreciation on each piece of machinery and equipment. These scenarios provide them with insights into the potential impact of different depreciation methods on their budget and overall financial performance. Based on the outcomes, they can make informed decisions on asset management, budgeting, and future capital investments.

Considerations

This is useful in the forecasting process, as it can give the user a much more comprehensive view of potential financial impacts of purchases than simply selecting straight line depreciation and hoping for the best.

We see two methods for doing this in CPM tools:

1. Create an entirely new version of the budget or forecast. Make the changes in both and compare.
2. Specialized functionality specifically for CapEx that does scenario analysis with depreciation and other components of CapEx Planning like lease vs buy, etc.

Questions to Ask a Vendor

• Comparisons: Is the scenarios analysis done by copying the entire budget version, or do you offer a dedicated module for this?
• Reporting: How to we view the comparisons to easily spot the advantages and disadvantages of an approach?