5 Ways Technology Can Help You Manage Your Organization’s Fixed Assets and Minimize Compliance Risks
If you’re responsible for managing your organization’s fixed assets, you understand the challenge of efficiently accounting for inventory and tracking everything. This high-priority task leaves little room for inaccuracies as the cost of getting it wrong can add up in a big way.
In today’s competitive market, it is more important than ever for companies to minimize their compliance risks by properly depreciating their fixed assets. If a company does not know what fixed assets it has on the books, it will soon have a complex and time-consuming problem.
What are ghost and zombie assets?
Failing to adhere to correct depreciation schedules can create ghost and zombie assets. Ghost assets are visible on the balance sheet but can’t be physically located, while zombie assets exist within the company but aren’t added into a depreciation schedule.
Ghost assets can result in false decreases in tax liability and compliance standard violations. Zombie assets can cause companies to overpay on property taxes and insurance costs.
Both ghost and zombie assets arise from improper tracking of fixed assets. Managing fixed assets on spreadsheets, while commonplace, leaves you more susceptible to ghost and zombie assets as it doesn’t provide real-time visibility and relies on error-prone manual data entry.
Like virtually every other business challenge, technology through digital transformation offers a solution. Adding fixed assets software to your existing ERP or accounting system can automate your asset tracking to help you easily plan, depreciate, track, and report.
Below are five ways technology can mitigate the risks of ghost and zombie assets.
To support optimal management, fixed assets should be inventoried regularly using a consistent method at every business location. A fixed asset management solution includes built-in quality and accuracy checks to assist with physical inventories and managing data in one central location. The accounting and facilities departments and any other stakeholders should be able to easily access inventory data to establish a system for conducting inventories, as well as creating new assets in the fixed asset management system upon purchase. In this way, both the facilities team and fixed asset accounting managers can be confident that ongoing operational procedures will result in the most accurate information possible in the companywide fixed asset management system.
If your organization owns multiple fixed assets that are nearly identical, it can be easy to dispose of the incorrect asset when assets are being retired. The best practice is to tag each asset with a unique identifier in the form of bar code labels. This provides the additional advantage of speeding up the inventory process through handheld technology that can scan and record each bar code in seconds. Labels are an essential aspect of fixed asset management that is often overlooked. Due to environmental requirements, bar code necessities, and custom printing needs, your solution should offer a variety of labels that can be printed on-demand to meet your specifications.
Tracking and depreciating fixed assets
Using a spreadsheet, essential data and details about assets can be difficult to manage. Tracking disposals, transfers, labor, locations, materials, and capital investments, as well as generally accepted accounting principles (GAAP), are examples of the key information you’ll want to easily access and filter on one platform for a pulse on self-constructed assets. Digital tracking allows you to customize the specific data points you’d like to track through automation, saving you the time it would take to search manually and facilitating a confident analysis. Robust solutions allow you to create custom depreciation methods, so you can track hundreds of different types of assets comprehensively and in real-time, in most cases.
Many stakeholders feed into the fixed asset management process, and your solution should support this level of collaboration. Spreadsheet formulas can break when passed from one employee to another, or improper cell reference can lead to inaccurate values. These inaccuracies can then lead to bigger problems.
A centralized repository of asset, lifecycle, and performance data as part of your fixed asset management solution can help resolve these data challenges. Integration with your organization’s purchasing or accounting software adds another layer of control and simplicity. Purchasing data is automatically loaded from one business stream to another, reducing human error and ensuring accuracy at each touch point. An integrated accounting and fixed asset reporting system eliminates the need to duplicate entries or export data between systems.
As time progresses and assets need to be replaced (or depreciated), you’ll want to start planning for the budget and other resources, especially if you have multiple locations. This allows you to track assets through the entire life cycle and reduce the risk of zombie assets from conception.
Manually managing fixed assets can eat up a considerable amount of staff time that could be better invested elsewhere. A dedicated solution, such as ERP Software, can provide real-time visibility into your fixed assets and protect your organization from excess loss and avoidable risk.
Information used in this article was provided by our partners at Sage.