The capital expenditures budget is probably the easiest item of the small business budget to estimate because it involves the capital investments that you plan to make during the year. Capital investments are major asset purchases for items such as buildings, machinery, and automobiles.
You probably already know the major asset purchases your company needs or wants to make in the coming year (or the period your budget covers if the period is not a year). Capital purchases can be made to replace equipment that has reached the end of its useful life. You may also need additional or new equipment to expand production, increase efficiency, or adequately serve customers’ needs.
After you determine what capital expenditures you will be making in the coming year, you need to estimate all of the costs that will be associated with the purchases. This includes any down payments, sales tax, delivery and installation, depreciation, and interest and principal payments that will be paid during the year.
After you have completed the capital expenditure budget, you will need to revisit the general and administrative budget and add any expenses, such as depreciation and interest that resulted from the capital expenditures budget process.
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