In today’s highly competitive business environment, proper management of fixed assets is essential for any business. Fixed asset management includes keeping track of the location, maintenance, and lifecycle of fixed assets before this information goes further for insurance value reporting and tax preparation purposes. The entire process is vital for the optimal financial health of the business.
But while heading toward growth, many businesses find it difficult to maintain a clear log and report on the fixed assets they own, which often leads to paying higher insurance premiums and more taxes. That is the reason why both fixed asset depreciation and management are a big challenge.
Challenges in managing fixed assets
There might be more challenges when an organization attempts to restrategize fixed asset management. Organizations usually experience a shortage of spreadsheets while trying to gather accurate data in one central place. This problem is more often seen in organizations that have corporate branches in multiple locations.
These are some common challenges in managing fixed assets:
What makes an organization consider fixed asset management solutions?
Numerous business aspects make an organization redirect its resources’ concentration on solutions focusing on proper fixed asset management. These include the abundance of data, increased data complexity, maintaining data stability and security, and completely utilizing skillful resources. In fact, 45% of companies use a fixed asset management solution to handle the increased complexity and volume of data.
Making use of appropriate tools is vital for accurate accountability of each asset. Moreover, thoroughly understanding risk factors associated with each asset’s lifecycle is helpful to identify cost-saving opportunities, whereas not having sufficient information about your business’s fixed assets can cost you a lot.
Here are 10 ways to cut costs in the fixed assets lifecycle.
1. Accurately register and track all fixed assets.
Businesses managing a large number of their assets need to revamp their processes that track fixed assets to keep the assets productive and safe for long. Maintaining (and updating) asset information by maintaining records of their purchase date and time and tracking their location, usage, maintenance, and insurance can help you make keep them efficiently productive throughout their lifecycle.
2. Consider investing in fixed asset tracking software.
You might be currently using spreadsheets to manage your business’s fixed assets. However, it’s easier and better to invest in fixed asset tracking software, as it can smartly handle all your fixed asset management processes. Software for fixed asset management can provide you more visibility into your company’s assets, allowing you to minimize the total cost ownership you pay. It is also helpful in streamlining financial workflows.
3. Create a complete fixed asset inventory.
It would not be difficult to create and maintain an entire inventory of your company’s fixed assets. For example, using barcode readers can help you manage the inventory and reconcile all the records in a central location, even if your business has multiple offices in different areas. Having a complete, centralized inventory can eliminate the risks of duplicate data entry, reduce the time taken for reconciling records, and save your staff time and effort.
4. Calculate tax and GAAP depreciation.
Inefficiently performing numerous depreciation methods and crunching numbers for multiple types of fixed assets can become costly as well as time-consuming. You may consider modern solutions such as TurboTax, H&R Block, Ultra Tax and ATX that automatically update with tax changes. Such applications can improve accuracy, free up your human resources that you can redeploy to other important business aspects, and eliminate particular bottlenecks responsible for low productivity.
Also, with accurate information, you will be able to stop accounting for assets that are no longer in use and paying insurance costs and taxes for the same.
5. Analyze KPIs.
It is recommended to analyze equipment breakdown data, costs of maintenance, equipment downtime, and work order backlog frequently to keep track of your fixed assets’ performance. Some software applications allow you to quickly evaluate KPIs and find ways to lower costs you spend on fixed assets.
6. Find smart ways to manage fixed assets.
Once you start maintaining a complete and organized inventory of the fixed assets you own, you will be able to use applicable depreciation methods for each asset and figure out ways to best manage their lifecycle from the first stage (acquisition) to the last stage (disposal).
Here, a good asset tracking software application plays a vital role, assisting you with everything, such as depreciation calculation and allocation of funds to monthly and year-end financials. Moreover, it can store insurance-related documents, images, warranty cards, expiry dates, etc., allowing you access to information of all your assets at a single point of reference.
7. Account for transfers, retirements and disposals.
If you are not closely monitoring and regularly analyzing your fixed assets’ lifecycle, you might be paying thousands of dollars for assets that don’t exist. With a reliable asset management system, you can quickly transfer, retire and dispose of assets. Bookkeeping also plays a vital role in asset management, and to prevent errors/mistakes (that lead to having ghost and zombie assets), many companies choose to outsource bookkeeping services. This also helps them improve efficiency in accounting operations.
8. Periodically conduct physical asset verification.
It would be easier for you to achieve an optimal level of management if you periodically conduct physical asset verification to ensure they literally exist. It will require the reconciliation of physically existing assets with asset records in accounting books. If exceptions are identified, yes, they should be reported further to take needed action.
You can simply match, scan, and attach associated invoices to asset records. This way, your company will have accurate information on the assessments of the assets, helping you be aware of where your assets are, in what condition, and if they are being used efficiently or not.
9. Keep your business compliant with the latest federal tax rules.
Undoubtedly, you want to stay compliant with the latest tax rules to avoid penalties. One Aberdeen study shows that 35% of fixed asset management software users consider compliance with the latest regulations a vital factor in minimizing risks. Moreover, a fixed asset management application can cast light on tax breaks and credits, leading to your company’s benefit.
10. Manage and monitor asset status.
Fixed asset management can become complicated for many business owners, as it requires following numerous rules and regulations, depreciation methods, and the assets being used in different locations makes the entire process even more complicated. However, there’s always a better way – fixed asset tracking or management software can help you save costs and improve the productivity of your company. It is recommended to use software to simplify tracking and depreciating fixed assets, making it a valuable aspect of your company that strives for growth.