Have you ever been in a situation where things just don’t add up? The most critical piece of effectively managing fixed assets is beginning with an accurate fixed asset inventory. Without this, there is no process or calculation that can give you accurate numbers on the accounting side. So the logical first step to managing and validating your fixed assets is to conduct a physical inventory. Not doing this can lead to over payment of taxes and insurance on obsolete assets, and if the discrepancies are significant enough, accuracy of company financials are at risk putting management in the hot seat when it comes to regulatory compliance.
According to Asset Management Resources, fixed asset data is typically about 65% incomplete, inaccurate, or completely missing, and 10 to 30 percent of assets aren’t even owned currently. An asset that falls in to this category is referred to as a “ghost” asset – property that is lost, stolen, unusable and is still listed as an active asset on the books. Ghost assets that are not reconciled can affect productivity if missing or unusable assets really aren’t available if needed and capital budgets can be affected if management is unaware of critical assets that need to be replaced.
Once the initial inventory is complete, all fixed asset inventory data should be centralized and reconciled against the existing data available. A reliable fixed asset management system like Sage Fixed Assets is helpful at this point, ensuring that fixed asset reporting provides management with an accurate assessment of the fixed asset picture across the company.
Tagging your assets properly is an important part of tracking and management process. Often times multiple assets that are similar, or even identical, are owned. Using a unique identifier, such as a bar code label and scanner, is a great way to ensure assets are counted, managed and disposed of accurately.
Another component in effective fixed asset management is an organized, consistent system that yields reliable depreciation results. Although Excel is the preferred method in a lot of small and mid-size companies, it requires manual manipulation for updates and calculations. Creating depreciation spreadsheets takes a lot of time and can often times contain errors in formulas that go unnoticed causing all kinds of miscalculations, missed changes in tax rules, no audit trails or history, limited internal controls, and have no way to integrate with your inventory solution. A good way to manage fixed assets is by using a database with a calculation engine.
Choosing the right fixed asset management option is really important. The stakes can be high if mistakes are made.
- Make sure it is scalable and fits the size of your organization as well as the number of current fixed assets as well as potential for future growth.
- Look at the inventory management solutions including labels and barcode readers and see if they accommodate your needs.
- Consider if the reports are comprehensive and customizable
- Take advantage of integration to your accounting application
Fixed asset software is designed to save time and reduce errors while tracking and managing fixed assets which can translate in to significant cost savings for your company. Start calculating correctly today!