Capital Asset Planning includes pre-built and configurable depreciation schedules

Description

Capital Asset Planning within Corporate Performance Management (CPM) software should feature pre-built and configurable depreciation schedules. These schedules enable businesses to predict and track the reduction in value of their physical assets over time. This feature simplifies the task of capital budgeting, complies with accounting standards and provides valuable insight for strategic asset management.

Example Use Case

Scenario: An enterprise-level manufacturing firm utilizes CPM software for its capital asset planning. The firm owns expensive machinery, which depreciates over time due to usage, wear and tear.

Solution: With pre-built and configurable depreciation schedules within their CPM software, the company can predict the machinery's value reduction over a determined time, aiding in future budgeting and asset management planning. Such depreciation schedules consider variables such as the purchase cost, salvage value, and useful life span of the machinery, delivering accurate and easier-to-understand financial forecasts.

Considerations

When rolling out a CPM system, assets will come from an existing database, and also be used to forecast new purchases. Existing assets may have a depreciation schedule attached; in which case it should also be imported into the planning environment. For new purchases, it is helpful to have various methods available to the user to simply select from a dropdown. That method will then push the various depreciation costs to a specific account. That account can be allocated across the business if needed.

The ability to comply with different accounting standards for depreciation, such as straight-line, declining balance, and units of production should be a key feature. If a depreciation method that you require does not exist in the system, investigate if it can be added as a re-usable option.

Questions to Ask a Vendor

• Pre-Built Schedules: Which depreciation schedules are supported by the software out of the box?
• Uploads: Are we able to upload pre-existing assets along with their depreciation schedules?
• Configuration: Can we add new depreciation schedules and map them to the appropriate accounts ourselves, or does that require consulting support?