How to Perform a Fixed Asset Inventory – In-Depth Guide

Learn the 10 Steps to a Perfect Fixed Asset Inventory

 

Many companies assume that since fixed assets are “fixed,” that their value is fixed as well. Unfortunately, those companies are missing out on significant cost savings potential that comes from having an accurate, and effective fixed asset management process.

But that’s not you. By this point, your business fully understands the value of performing a fixed asset inventory… you’re just not quite sure how to start the process, or how to re-start after years of neglect.

This guide is here to help you.

 

Your Step-by-Step Guide to Performing Your First Fixed Asset Inventory (or First in a Long Time)

 

To perform your first asset inventory, or the first in a long time, you will want to complete these 10 steps. Make sure that you complete each step fully before moving on.

1. Establish which assets to inventory and decide whether they should be identified as individual assets or as part of an asset group. A group is multiple, similar fixed assets that have the same depreciation rules, such as “buildings” or “office chairs.”
2. Analyze your existing fixed asset records to determine your categories. You will definitely have physical inventory assets, and you will probably also have real property assets and non-inventory assets. You may have intangibles as well, or asset additions since your last review if you performed a fixed asset inventory sometime in the past.
3. Ensure clean data by creating fields for: manufacturer, model, serial number, department, and GL account numbers. Standard databases and Excel spreadsheets will limit how flexible your structure can be, which is why we recommend using dedicated fixed asset software with customizable fields, that also allow for preset drop-down lists.
4. Perform a physical inventory and tag your assets as necessary. We recommend using pre printed, durable barcode labels that you can scan with a handheld mobile scanner. Make sure you use the right type of material for your barcode labels paper barcodes from a desktop printer will not last the life of the asset. Using fixed asset tracking software vastly speeds up this process.
5. Track down your initial acquisition costs, as well as the dates each asset was placed into service. If you cannot find the records for an asset, you can use a valuation appraisal service to determine the correct acquisition value.
6. Reconcile your results with any existing fixed asset ledgers by class and year, so you can uncover unrecorded retirements and additions to the GL.
7. Integrate your new list of verified physical assets into your fixed asset system, to include assets such as software, patents, land, or buildings, so you can have a comprehensive ledger of all your fixed assets. By working efficiently, you can assign a unique asset ID to these other asset records as well.
8. Enter your comprehensive asset list into a database. Spreadsheets typically lead to errors later on, which can undo a lot of the hard work you’ve done so far in steps 1-7. Save yourself a headache and consider a fixed asset software solution.
9. Perform depreciation calculations for each of your assets or asset classes, taking current tax laws into account. We recommend using dedicated fixed asset depreciation software for this step because it saves a lot of time, gets updated annually with new tax regulations, and significantly improves accuracy.
10. Generate final cost reconciliation reports, identifying all unrecorded retirements for write-off and documentation of tax savings.

 

Should You Outsource Your Inventory Process or DIY?

 

As you can tell, this entire process takes a while and can be a lot of work. In fact, it can take businesses 1-2 years to complete every one of these steps. In the meantime, ghost and zombie assets can drag down your balance sheets and cost a lot of money in unnecessary property taxes and insurance premiums.

Instead of waiting years, many organizations choose to outsource this task to a fixed asset inventory expert. Here at Paragon, we offer a turnkey inventory solution in which our consultants handle every step for you. When we have your new system set up, we train your team to perform ongoing inventory management of your assets.

 

Don’t Forget to Maintain Your Asset Inventory Year After Year

 

Whether you choose to outsource your initial inventory process to a professional or DIY, you should certainly schedule a time for your in-house team to perform the annual asset inventory update process. This does not have to be time consuming or difficult – as long as you stay on top of it.

Fortunately, maintaining your inventory records is quite easy, once you’ve completed all the steps for setting up your full inventory. Each year (and for each new asset), you will want to:

• Barcode – Apply barcode label to tag new assets with a unique barcode asset tag, and replace any old labels that are faded or peeling
• Scan – scan every barcode label to ensure you have an accurate record of on-site assets
• Update – update your records to reflect accurate depreciation per asset and asset class
• Reconcile – compare the previous asset list to the current inventory and identify if any assets have broken, disappeared, been sold, or are no longer in service
• Report – finalize the process with style, using a fixed asset reporting solution that provides presentation-ready reports for you and helps ease tax prep

As a part of the turnkey Paragon Inventory Solution, we will train your appropriate team members on how to complete this process regularly. That way, you can be sure that your team knows how to keep your newly inventoried fixed asset records accurate and up to date.

 

Learn More About the Turnkey Paragon Fixed Asset Inventory Solution

 

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.