⚡ Quick Summary
- Maintenance capex keeps the lights on; growth capex expands capacity, revenue or margin. Both consume cash and affect working capital.
- The fastest way to lose control of net working capital is to approve growth projects while under‑resourcing maintenance that protects existing cash engines.
- Create a clear classification framework: each project is tagged maintenance or growth, with different hurdle rules and reporting expectations.
- For maintenance capex, focus on risk reduction, uptime and protection of working capital balances tied to current revenue streams.
- For growth capex, require explicit links to incremental cash and use simple working capital metrics and cash ladders to validate assumptions.
- Use standard templates for capex schedules so deposits, draws and retentions are treated consistently and you can see portfolio‑level cash impact.
- Tie decisions back into your working capital playbook so you know when to defer growth in favour of liquidity and covenant protection.
If you’re short on time, remember this: never let “growth” projects quietly erode the cash generated by your core business because maintenance has been starved.
📌 Introduction: Why This Topic Matters
Boards constantly push for growth, but the cash that funds expansion usually comes from existing operations. When finance teams blur the line between maintenance and growth capex, everything ends up competing in the same queue, and decisions default to politics instead of cash priorities. The result: assets that underpin core cash flow are under‑invested in, future projects slip, and working capital becomes the shock absorber for inconsistent planning. This guide gives operators a simple, repeatable way to classify projects, set rules and link each capex decision to net working capital outcomes. It builds on your broader capex evaluation framework and complements project‑level models like buy vs lease and new location decisions, so maintenance and growth are both funded with intent, not guesswork.
🧩 A Simple Framework You Can Use
Use a three‑layer framework: classify → model → govern. First, classify each item as maintenance (protect current cash) or growth (expand future cash) using clear operational tests-does this project simply keep current revenue running, or does it open new volume, pricing, or efficiency? Second, model each project with a consistent capex schedule and a dedicated working capital view: how do deposits, draws, and completion dates affect cash, inventory, receivables, and payables? Third, set governance rules: maintenance gets priority protection for uptime and compliance, while growth projects must pass stricter cash and return thresholds, including impact on working capital balances and covenants. This framework slots into your wider budgeting and forecasting process so annual plans reflect a deliberate mix of maintenance and growth.
🚀 Step-by-Step Implementation
Step 1 – Build a Classification Rulebook
Start by defining maintenance and growth in operational language that your teams recognise. Maintenance projects typically restore capacity, meet compliance, or replace like‑for‑like equipment. Growth projects add capacity, unlock new customers, or materially lower unit costs. Document examples for your business: refurbishment of a production line (maintenance), adding a second line (growth), and deploying new analytics that increase sales conversion (growth). Link your rulebook to the capex intake form so every request is tagged on submission and mapped into your capex evaluation pillar. Train managers on why this classification matters for working capital management-maintenance protects the cash engine you already have, while growth competes for free cash and debt headroom alongside other investments.
Step 2 – Standardise Capex Schedules and Data
Once classification rules exist, enforce a standard schedule template for all projects. Require the same fields for deposits, milestone payments, retentions, and commissioning dates. This lets you compare total cash demand across maintenance and growth, instead of reacting to one‑off surprises. Embed a simple working capital section in the template: expected impact on inventory, receivables, and payables, plus any changes to service levels that affect cash conversion cycles. Use these schedules to build a consolidated view of cash commitments across your portfolio. With structured data in place, calculating working capital implications and stress‑testing different approval scenarios becomes a fast, repeatable exercise rather than a month‑long spreadsheet scrape.
Step 3 – Map Projects to Working Capital and Cash Ladders
Next, roll your scheduled outflows into a short‑ and medium‑term cash ladder. Group maintenance and growth projects separately so you can see how each category draws on working capital balances and financing lines. For growth capex, explicitly link project assumptions to incremental cash: higher volumes, better margins, reduced churn, or lower maintenance. For maintenance, emphasise avoiding downtime, safety, and the stability of existing cash flows. Overlay portfolio‑level working capital metrics, such as days cash on hand and headroom against covenants or internal floors. This ladder should sit alongside your project‑level evaluation tools, giving executives a single view of “what are we committing to, and what does it do to liquidity?”
Step 4 – Set Funding and Prioritisation Rules
Now use this structured view to define rules. Maintenance capex that protects critical revenue or safety should typically be funded first, unless the business is already over‑invested in certain assets. Growth projects must clear higher bars: positive NPV, acceptable payback, and no breach of net working capital or leverage thresholds. Document these rules in your capital allocation policy so every approval or deferral can be explained in cash terms rather than anecdotes. Link rules to other frameworks, like vendor financing choices and broader investment decision models, so every project, regardless of type, competes consistently. This is how you make working capital management a core part of capital budgeting, not an afterthought.
Step 5 – Review Performance and Adjust the Mix
Finally, close the loop by measuring how approved projects actually perform. Track realised cash flows vs model, including maintenance spend vs unplanned outages, and growth investments vs incremental cash generated. Feed these results into your working capital dashboards and budgeting process, adjusting future allocations between maintenance and growth categories based on evidence. If growth projects consistently under‑deliver on cash, tighten approval criteria or adjust your hurdle rates. If maintenance underspend leads to outages that hurt cash conversion, expand your baseline allocation. Over time, this feedback loop turns capex planning into an iterative, data‑driven process instead of a static annual argument.
💼 Real-World Examples
A multi‑site retailer faces a long list of capex requests: store refits, new locations, POS upgrades, and logistics automation. Using the maintenance/growth rulebook, finance tags each request and standardises schedules. Maintenance projects that fix failing refrigeration and POS hardware are prioritised because they directly protect revenue and working capital through reduced shrinkage and downtime. Growth projects, such as opening two new locations, must show clear incremental cash and pass the broader location evaluation model. Portfolio cash ladders reveal that funding all growth projects would push net working capital below internal floors just as the firm enters peak season. The CFO chooses a staged approach: fully fund maintenance, green‑light the highest‑return growth project, and push the others into a later planning cycle.
⚠️ Common Mistakes to Avoid
Common mistakes include calling everything “growth” to make approvals easier, which hides risk and starves critical maintenance. Another is ignoring how capex decisions affect working capital balances-projects are approved based on NPV alone, with little regard for cash timing. Teams also under‑document assumptions, making it impossible to learn from previous rounds or reuse templates. Finally, portfolios are rarely reviewed through a cash lens; decisions are made project‑by‑project rather than via a ranked list showing dollar impact and working capital metrics. Avoid these traps by enforcing classification rules, using standard schedules, linking every project to a cash ladder, and embedding working capital management constraints into your investment decision frameworks.
📈 Next Steps
Start by reviewing your current capex pipeline and tagging each project as maintenance or growth using a simple rulebook. Then, adopt a standard capex schedule template and plug all projects into a single cash ladder that shows impact on working capital balances and headroom. From there, apply clear prioritisation rules and connect them to your broader capex & project evaluation pillar and project‑level tools such as new location analysis and project ranking by dollar impact. Finally, embed these practices into your annual budgeting process so every funding round improves your mix of maintenance and growth. The payoff is a capital program that grows the business without quietly bleeding liquidity.
Back