Capital Investment Control and Monitoring
A capital investment reporting system is required to review and monitor the performance of investment projects after complication and during their life. The follow-up comparison of the actual performance with original estimates not only ensures better forecasting but also helps to sharpen the techniques for improving future forecasts. Based on the follow-up feedback, the company may reappraise its projects and take remedial action.
Asian companies practice control of capital expenditure through the use of regular project reports. Some companies require quarterly reporting, others need monthly, half-yearly and yet a few companies require quarterly reporting, others need monthly, half-yearly and yet a few companies require continues reporting. In most of the companies, the evaluation reports include information on expenditure to date, stage of physical complication, and approved and revised total cost.
Most of the companies in reappraising investment proposals consider comparison between actual and forecast capital cost, saving and rate of return. They perceive the following advantages of reappraisal:
- Improving in profitability by positioning the projects as per the original plan.
- Ascertainment or errors in investment planning which can be avoided in future.
- Guidance for future evaluation of projects.
- Generation of cost consciousness among the project team.
A few companies abandon the project if it becomes uneconomical. The power of review is generally invested with the top executives of the companies in Asia.
No comments:
Post a Comment