If you’re responsible for managing your organization’s fixed assets, you understand the challenge to efficiently account for, inventory, and track 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 with certainty what fixed assets it has on the books, which is fundamental for calculating fixed asset depreciation, it will soon have a complex and time-consuming problem on its hands.
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. The price tag for carrying ghost and zombie assets around can be as scary as their names imply.
Ghost assets can result in false decreases in tax liability and compliance-standards 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 plan, depreciate, track, and report with ease.
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Below are five ways technology can mitigate the risks of ghost and zombie assets.
In order to support optimal management, fixed assets should be inventoried on a regular basis 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 important 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
Important data and details about assets can be difficult to manage using a spreadsheet. Tracking disposals, transfers, labor, locations, materials, and capital investments, as well as generally accepted accounting principles (GAAP) are examples of key information you’ll want to be able 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.
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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.
Having 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 the other, 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 it’s time to replace assets (or depreciate new ones), you’ll want to start planning for the budget and other resources to do so – especially if you have multiple locations. This essentially allows you to track assets through the entire lifecycle and reduce the risk of zombie assets from conception.
Manually managing fixed asset can eat up a considerable amount of staff time that could be better invested elsewhere. A dedicated solution, such as Sage Fixed Assets, can provide real-time visibility into your fixed assets and protect your organization from excess loss and avoidable risk.
This article is part of our Sage Fixed Assets series. Sage Fixed Assets integrates with ERP and accounting solutions, including Sage 50, Sage 100, Sage 300, and Sage X3, to allow companies to manage every step of their fixed assets lifecycle.
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No organization can afford to manage their fixed assets based on spreadsheets and assumptions. Download our guide for best-in-class fixed asset management strategies to help you track, maintain, and depreciate your assets properly.