Show me The Money

Money makes the world go round. It is the lifeblood of any organization - large or small, for-profit or not-for-profit. So it's no wonder that when it comes to making decisions about where to allocate precious resources, everyone wants to see "The Profit."

Too often, businesses approve Capex requests without really thinking through whether or not the investment will pay off. They just assume that because they need the new equipment or software, it must be worth spending the money on. But that's not always true! In fact, sometimes businesses end up losing money on investments like this.

So, before I can show you the money, Show me a plan for how that money will be made back - and then some. Because deploying funds without a clear path to profitability is nothing short of strategic malpractice.

It's crucial then to do your research before investing in anything - especially when it comes to capital expenditure (Capex). Capex can be a great way of boosting your business' fortunes, but only if it's done correctly. Here are three tips for ensuring your Capex leads not just to increased profits but also improved cash flow:

1. Don't overspend: It might be tempting go all out when investing in Capex projects, but this is often where businesses go wrong. Overspending can quickly lead to financial difficulties and even bankruptcy; so make sure you know what you're spending and why.

2. Balance short-term gains with long-term goals: It can be easy get caught up in the excitement of seeing immediate results from your Capex projects; but don't forget about the long-term goals of your business! Make sure any investments made are aligned with these aims for the best results down the line.

3. Keep track of performance: This one goes without saying really; if you want improve future Capex decisions then you need track how past ones have performed. Use analytics tools and other methods such as surveys or interviews with employees/customers/other stakeholders etc… to gain an accurate picture.

I'm not saying that every Capex request needs to meet an exact ROI threshold in order for approval. But would you invest your own money on that proposal? If the answer is no, then why should we approve spending company funds?

Before making any decision about allocating resources, we need ask ourselves this question: Is this going to help us make more money? If not, then we probably shouldn't do it.