Why Product Managers Should Care About Software Capitalisation
Building software is expensive. And in 2025, it feels even more expensive
Funding’s tighter, interest rates are still high, and every senior leader is asking with more frequency: “What are we actually getting for all this product and engineering spend?”
That’s where capitalisation comes in. It’s not the most interesting topic in product management. But right now, it’s having a real impact on what gets prioritised, and how product leaders are making the case for investment.
What is capitalisation?
At its core, capitalisation is an accounting way of saying: “This software we’re building is a long-term investment, not just a cost.”
Instead of expensing all the dev work in one go (which hits the P&L immediately), companies can choose to treat certain software development costs as assets. Which means that those costs get spread out over time.
This doesn’t magically make the work cheaper. But it does change how it shows up financially, and that’s important.
Why is it important?
In ‘better’ economic times, capitalisation was mostly something handled in the background. But in today’s climate, it’s front and centre for a few reasons:
Budgets are under pressure
With less funding floating around, especially for startups and scale-ups, finance teams are looking for ways to stretch the runway. Capitalising development work means there is less immediate impact on the P&L, so some product investment becomes easier to justify.
Everyone’s chasing “profitable growth”
Gone are the days of growth-at-any-cost. Investors want to see efficient, sustainable growth and capitalising big product investments can help show that you’re building long-term value, not just burning through budget.
It changes what gets prioritised
Projects that qualify for capitalisation like new platforms, products, or big infrastructure work are more likely to get the green light. Meanwhile, valuable but less “accounting-friendly” work (like refactoring, discovery, or UX enhancements) might struggle to find funding unless you have strong advocates for it.
How it impacts product managers
You don’t need to become an accountant, but capitalisation will start to affect your world. Some points to remember:
1. Priorities shift toward the “capitalisable”
Work that can be capitalised gets more attention because it looks better on paper. You might notice a push toward roadmap items that are clearly scoped, revenue-aligned, and big enough to meet the criteria. That’s OK but it also means product leaders need to make space for the less visible (but still important) work.
2. You’ll spend more time with the finance team
Expect more questions like:
“Is this project technically feasible yet?”
“Can we separate the development phase from discovery?”
“Are your teams tracking time accurately?”
Scrutiny will increase. Your ability to explain and justify what your team is doing and where in the lifecycle you are becomes very important…. to more people.
3. Roadmaps become financial tools
In this environment, a roadmap isn’t just a product communication tool. There is a real danger that it becomes a planning and budgeting tool. How you scope, label, phase and communicate your initiatives could influence how they’re treated financially. That’s new territory for many PMs.
4. Time tracking gets serious
Capitalisation depends on knowing how much time your teams are spending on specific types of work. So don’t be surprised if suddenly there’s more emphasis on accurate time logs or phase-based reporting. This will feel like overhead.
So as a Product Manager what do you need to do?
Get in early with finance. Talk to them during planning, not after. It’ll save you and them a lot of last-minute stress.
Be clear about what your roadmap is for. Use the right tool for the right audience and purpose. Should a roadmap serve all needs or is there a better method to report status, budget, milestones, plans?
Don’t let accounting run your roadmap. Yes, it’s tempting to frame everything as capitalisable. But don’t let finance rules dictate your product strategy. Some of the best work won’t ever be capitalised.
Keep advocating for the “unseen” stuff. Discovery, research, design, refactoring. These things still matter. You just might need to explain their value differently.
Watch out for false consistency. Not everything needs to be documented or structured the same way just to make it capital-friendly. Sometimes that slows you down more than it helps.
Talk to your team. Most engineers and designers don’t think about capitalisation. But it impacts them, especially when it comes to project phases and time tracking.
Final thought
Capitalisation won’t make or break your product, but if you hear it being discussed, you need to listen. It’s one of those behind-the-scenes levers that will change how you work day-to-day, so you need to know how to work with it
