Re: Spending Authority/Limits-Advice...

From: Andrew Rich (
Date: Thu Dec 03 1998 - 04:54:04 EET


If I remember my MBA courses in corporate finance correctly, I think I have the definitive answer for you: Positive NPV

There is no limit but your own cash flow per project. There has been some debate about whether APV, (Adjusted Present Value) or Net Present Value are the best gage for cost evaluation, but that gets into splitting hairs on the RP level of spending.

Essentially, just look at the benefits realized over time: Savings plus added earnings. Do the benefits outweigh the costs? You might have enough cashflow benefit to justify 275 CATIA seats, or one SLA machine might be overspending.

Is that the answer you wanted or did you want a solid number?

Andrew Rich
Boston University

Chris Meyers wrote:

> Members,
> we're in the process of setting some new corp. policies related to internal spending authority specifically for capital equipment/hardware (ie. RP equipment, or CNC machines, etc), and software (ie. CAD/CAM, Pro-E, etc.)... From your perspective or experience, what would be appropriate spending limits, authority and protocol for approvals for line staff/middle management, or those most likely to be making the educated/informed buying decision? At what level of spending would those persons need to or be required to go to "upper management", comptroller/CFO for "authorization" to spend.
> We're most interested in setting the upper limits to give maximum flexibility to our line staff, BUT not giving them so much spending authority they jeopardize cash flow or annual budgets for the sake of buying something they get sold on, or insist on buying without authorization from someone else in the company. Your feedback is most appreciated. Chris.
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