Q: I always seem to be caught between budgeting Capital Expenditure (CAPEX) funds for a possible emergency and losing any excess funds at the end of the year. How can I spend my CAPEX dollars more wisely?
A: Every year, the same thing happens. Club executives frantically realize the year will soon be coming to an end and they need to spend CAPEX dollars now! Immediately! Yesterday!—too late in the year for the process to be anything but rushed, stressful and disappointing. Here’s why we recommend not waiting any longer to spend those CAPEX dollars:
Plan ahead. Proactively consider what you might need to replenish or update next spring or summer. Something major could stop working next year and you find you have no budget to replace it and/or experience downtime until a replacement arrives. Check to see if prices are likely to jump next year on essential items you might need. Start planning now and you’ll probably see where your remaining budget should go.
Maximize your cash flow. Customers who wait until the last minute typically have to pay upfront on an invoice—weeks or months before their items actually arrive. Buying now means you’ll not only have time to shop around for the very best choice, but you’ll actually get your items before you have to pay for them.
Give proper lead time to save money. Did you know the average lead time for something as straightforward as a commercial dishwasher is 12 weeks? Between delivery, freight, installation, removal of the old equipment, troubleshooting, and training your associates, trying to rush through any part of the purchasing process can cost you.
Expect the unexpected. Just-in-time delivery just doesn’t work. When you’re dealing with big-ticket items, high-volume orders and installations, there are a lot of things that derail a meticulous schedule. Back-orders, union regulations, building codes, plumbing and electrical concerns—you name it, we’ve seen it. You can avoid many of those hiccups—primarily by not doing things at the last minute.
Give new legs to “last legs” items. It’s the age-old question of when to buy and when to repair. Even if you’ve got something you’re hoping will last another season without costly repairs, now is the perfect time to take a hard look at those energy-hogging older models. For example, a $50,000, energy- efficient dishwasher can pay for itself in just two years. How much are dinosaur appliances costing you in energy and maintenance? Obvious, but worth repeating: If you don’t spend your CAPEX dollars by year’s end, you won’t have those dollars next year.
Mike Grossman, the senior director of Avendra Replenishment Group, has more than 30 years of procurement experience with a strong concentration in commercial food service kitchen equipment. Mike can be reached at [email protected] or visit www.avendra.com/replenishment for more information.