Fixed asset management involves monitoring the location, maintenance, and life-cycle of fixed assets until this information goes forward for the purposes of reporting insurance value and tax planning.
Proper management of fixed assets in today’s highly competitive market environment is important for any company. The whole process is critical to the company’s optimum financial performance.
Yet when going towards expansion, it is difficult for many companies to maintain a consistent log and report on the fixed assets they own, which also leads to higher insurance rates and more taxes being charged. Which is why both the depletion of real assets and the management are a major obstacle.
Where an company tries to re-strategize fixed asset management, there might be further obstacles. Organizations typically face a shortage of spreadsheets when trying to gather reliable data in one central location. The problem is found most frequently in companies with numerous locations in corporate divisions.
These are some common problems in the management of fixed assets:
- a multitude of spreadsheets
- No’ requirements ‘ section inserted into spreadsheets, resulting in lost data
- Chances of emails with attachments being missed
- weekly, quarterly and yearly deadlines
- In-coherency in data reporting
- tax consequences
- Risks associated with no openness or data background
What makes an enterprise find options for fixed asset management
Numerous business considerations allow a company shift the concentration of its resources to strategies that concentrate on careful management of fixed assets. Those include data abundance, increased data complexity, preserving data stability and protection, and using skillful resources to their maximum potential. In addition, 45 percent of businesses are using a fixed asset management system to address the increased complexity and data volume.
It is important to make use of appropriate resources to ensure correct accountability for each asset. Additionally, a detailed understanding of the risk factors associated with the lifecycle of each asset is helpful in finding cost-saving opportunities, while not providing enough knowledge about the fixed assets of your company will cost you a lot.
Here are 10 ways to minimize costs in the lifecycle of fixed assets.
1. Register and track all fixed assets with precision.
Businesses that control large quantities of their assets need to revamp their processes that track fixed assets to keep the assets competitive and secure for a long time to come. Maintaining (and updating) asset information by keeping records of their date and time of purchase and monitoring their position, use, repair, and insurance will help you keep them efficiently productive over their life cycle.
2. Consider investing in software which tracks fixed assets.
Currently you may use spreadsheets to handle the fixed assets of your company. Investing in fixed asset monitoring software is therefore simpler and cheaper because it can handle all of the fixed asset management processes smartly. Fixed asset management tools will give you more insight in the assets of your company, so you can reduce the overall cost ownership you pay. This helps to streamline financial workflows, too.
3. Establish a full inventory of the fixed assets.
Creating and managing an entire warehouse of the firm’s fixed assets will not be difficult. Using barcode readers, for example, can help you monitor the inventory and consolidate all documents in a single location even when your company has several offices in various locations. Using a full, consolidated inventory will remove the risks of duplicate data entry, reduce the amount of time required to update records and save time and energy on the staff.
4. Calculate the depreciation for taxes and GAAPs.
The inefficient implementation of various methods of depreciation and the crunching of numbers for several forms of fixed assets can become both expensive and time consuming. Modern solutions such as TurboTax, H&R Block, Ultra Tax and ATX can be considered every upgrade automatically with tax changes. These systems will improve performance, free up your human capital that you can redeploy to other critical business aspects and remove the unique bottlenecks that are responsible for low productivity.
You will now be able to avoid paying for properties that are no longer in use with correct details, and to pay for the same insurance premiums and taxes.
5. Study of KPIs.
To keep track of the performance of your fixed assets, it is recommended to review the equipment breakdown results, repair costs, equipment downtime, and work order backlog regularly. Some software applications allow you to calculate KPIs easily and find ways to reduce the costs you spend on fixed assets.
6. Find intelligent ways to handle the fixed assets.
When you begin to maintain a complete and structured inventory of the fixed assets that you own, you will be able to use appropriate methods of depreciation for each asset and find ways to better manage their life-cycle from the first stage (acquisition) to the final stage (disposition).
Here a successful application for asset monitoring software plays a critical role, helping you with everything, such as measuring depreciation and allocating funds to monthly and year-end financials. In addition, it can store insurance-related records, photos, warranty cards, expiry dates, etc., allowing you to view information about all of your properties at a single reference point.
7. Transaction account, retirement account, and disposal account.
Ghost and zombie assets are a major factor you spend more on your fixed asset management and, at the same time, finding them can be a way to reduce costs. Assets that are paid for on the ledger but are not physically present anywhere in the business are ghost assets; typically 15-30 per cent of fixed assets are ghost assets. On the opposite, properties that can be found physically but do not have any records on the books are properties to zombies.
If you don’t track carefully and evaluate the lifecycle of your fixed assets on a regular basis, you may be paying thousands of dollars for assets that don’t exist. With a robust asset management program, assets can be moved, withdrawn, and disposed of easily. Bookkeeping also plays a vital role in asset management, and many businesses prefer to outsource bookkeeping services to avoid errors / mistakes (that lead to ghost and zombie assets). This also helps them increase accounts operations efficiency.
8. Periodically conduct inspection of the physical properties.
It would be easier for you to reach an optimum management standard if you are undertaking regular inspection of physical assets to ensure that they exist literally. It may involve reconciling physically current assets into accounting books with asset records. If exceptions are found, yes, they should be reported to take appropriate action further.
Just suit, search, and add relevant invoices to asset records. That way, the organization will have detailed details about the asset evaluations, letting you know where the assets are, in what condition, and whether or not they are being used efficiently.
9. Keep your business sticking by the new federal tax laws.
There is no question that you want to remain in compliance with the new tax laws in order to escape sanctions. One research by Aberdeen shows that 35 per cent of consumers of fixed asset management applications consider compliance with the new regulations as a critical factor in reducing risk. In addition, a fixed framework for the management of assets will shed light on tax breaks and incentives contributing to the advantage of your company.
10. Manage and track the status of the properties.
When the company expands over time, you are adding more assets; therefore, a more comprehensive framework for simplifying fixed asset management will become necessary. Doing this will give you more insight into your capital assets, reducing their overall ownership costs while streamlining both operational and financial workflows. New product intelligence is a perfect way to efficiently handle the fixed assets.
For many business owners, fixed asset management may become difficult, as it needs various rules and regulations to obey, methods of depreciation, and assets used at different locations make the whole process much more complex. There’s always a better way though –fixed asset monitoring or management tools will help you save money and increase the company’s productivity. Using software is recommended to automate the monitoring and depreciation of fixed assets, making it a valuable part of a business that strives for development.