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.
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 capitalContinue reading