Does your machinery capital cost and total capital invested exceed the benchmarks, 10% of, and 1 times average income respectively?
Many growers have an informal policy around when they changeover a machine, such as engine hours, age, or staying up with the latest technology. But replacing machinery is also about knowing which machinery item to prioritise and when to act to minimise the changeover cost.
Failing to plan for machinery upgrades, particularly big-ticket items, can result in multiple upgrades falling due at once, inefficient use of capital, and/or under-utilisation of plant. This can cause significant cashflow and financial problems to your business.
Having your strategy mapped out in advance allows you to keep an active eye on the market and buy when the price is right, which might be in a dry year!
ORM’s machinery and equipment CAPEX matrix strategically maps out the priority, timing, amount, age and financial impact of machinery upgrades. It also calculates key benchmarks to ascertain whether key measures like machine capital cost and total capital invested are in check. It’s only once you have this information that informed decisions can be made around machinery investment, timing and utilisation. The matrix also acts as a great communication tool for businesses with more than one manager, to ensure that all parties are on the same page with respect to the replacement policy.
If you’d like to understand more about how ORM’s machinery and equipment CAPEX matrix can add value to your business and leverage off our consultants’ business experience give us a call.