Your Spreadsheets Are Probably Inaccurate. This Can Create Big Issues When It Comes to Depreciation of Fixed Assets.
Forrester reports that over 50% of organizations use spreadsheets to keep track of business intelligence such as info on depreciation of fixed assets. MarketWatch reports that nearly 90% of spreadsheets contain formula errors. This is a bad combination.
Making errors has high stakes: if your company loses track of your assets or has errors in depreciation formulas, you lose money through missed tax depreciation incentives. You also risk audits resulting from inaccurate financial statements. This is only the tip of the iceberg.
Here are 5 reasons why companies should NOT use spreadsheets to manage their fixed assets.
5 Reasons Spreadsheets Do NOT Work for Managing Depreciation of Fixed Assets
- Missed tax-saving opportunities
Spreadsheets have very limited classification and filtering capabilities, which can make it troublesome and time consuming to determine your eligibility for evolving tax deduction incentives.
Here’s an example: On January 1, 2023, the Section 168(k) allowances were reduced to 80% bonus depreciation. On January 1, 2024, that will reduce further to 60% bonus depreciation allowed. Each year, another 20% in bonus depreciations will be lost. Can you easily filter your spreadsheet fixed asset data right now to see what you can claim 80% bonus depreciation on before the end of this year?
- Easy to make mistakes
Spreadsheets are built to handle a nearly unlimited variety of data, which means they don’t contain underlying logic to help sort out what is — and isn’t — allowed specifically for the depreciation of fixed assets.
This flexibility can lead your accounting team to make costly mistakes. It is far too easy to overlook changing tax laws or arcane allowances in hard-to-understand tax codes —especially when depreciation timelines can be decades long. Underlying logic in purpose-built fixed asset software helps avoid these mistakes.
- Leads to overpayments
If you cannot easily calculate the depreciated value of your fixed assets, you are nearly guaranteed to overpay on your income taxes or insurance premiums. If you cannot easily track your fixed assets, you may be paying to insure items you no longer have.
Of course, it goes without saying that if your lack of insight makes you miss a limited-opportunity deduction, you are also likely to be overpaying on your business’s income and property taxes.
- Data is likely to “go missing”
Spreadsheets are easy to create, but hard to maintain. In fact, spreadsheets have a lot of awkward tradeoffs. They make it easy to overwrite data, and hard to roll data forward. They make it easy to create (and get lost in) multiple versions, and they make it hard to maintain accurate data across those versions.
Additionally, the format of a spreadsheet typically is similar to how it needs to be reported. If you have multiple reports to produce, replicating the data as needed for each is even more challenging and error prone.
Over a timespan of potentially decades, this means your fixed asset data is likely to go missing, along with your tax-saving deductions.
- Creates costly headaches
One of the biggest issues with spreadsheets is that they lack an audit trail. Literally anyone with access to your spreadsheet can change data and save the file – and it’s unlikely that your offices will ever realize there was a change. Clearly this is an issue for accurate accounting and defies GAAP standards, but there’s a larger problem here too.
Even if a change was fully authorized at one point, it may create puzzles later on that leave you needing to defend that change. Without an audit trail, you won’t know if you or another person are accountable for those differences. You also won’t have a trail of communication that explains what happened. Ultimately, you won’t be able to defend the spreadsheet and you may have to pay penalties on questionable depreciation of fixed assets from prior tax periods. That is an expensive headache.
Get Top Tips on How You Can Better Manage Your Fixed Assets the Right Way
Fortunately, you can fix all these issues as long as you are willing to put in a little work. The fixed asset experts at Paragon International are here to help you get your tasks in order.
Access our handy white paper, “Death to Spreadsheets,” for detailed information on the best practices to follow for better fixed asset accounting, the top issues and risks to watch out for, and smart solutions and methods you can use to address those issues quickly.
The white paper also contains some sobering statistics that every fixed asset accountant should know, helpful recommendations on how to bring your fixed assets up to date and back to life, and the top features to look for when you are ready to start comparing fixed asset software solutions, such as Sage Fixed Assets.
Serving clients since 1985, Paragon International, Inc. provides independent, impartial and accurate cost segregation analyses, and property valuations and appraisals to assist in and support decisions related to taxes, risk management, investment, financing and corporate planning. Our consultants have extensive fixed asset experience – they’re fixed asset experts. Because of that we are able to offer a unique combination of irreplaceable human resources and advanced technology. We have specialists experienced in valuing closely held securities, patents and other intangible assets, business enterprises, buildings, equipment and real estate. In addition, Paragon provides complete inventory and asset management services and solutions, including software customization and training, barcode labels and scanners, and tailored inventory services such as data conversion and integration, asset inventories, asset policies, cost reconciliation, and appraisal services. Contact Paragon International to discover how we can help you.