The process of managing a fixed asset begins before the asset is acquired. Companies and their fixed asset managers need to think about the entire fixed asset lifecycle – from acquisition to transfer and ultimately disposal. Unfortunately, that isn’t always the case.
Elephants in the Room: Fixed Assets
In the world of accounting, the potential savings from improved fixed asset lifecycle management is often overlooked. Yet assets such as buildings, machinery, computers and other electronic equipment, vehicles, office furniture, and manufacturing equipment are some of the largest investments most companies make. For 80% of Fortune 500 firms, fixed assets represent the largest line item on their balance sheet. Poorly managed and often ignored, these “elephants” can wreak havoc on profitability.
A sound fixed asset lifecycle management plan can yield substantial savings in tax depreciation deductions and property insurance coverage. Conversely, suboptimal fixed asset practices can threaten the accuracy of financial reports and negatively impact the company’s bottom line.
A lifecycle-based approach to fixed asset management helps to better plan, allocate costs, calculate and report depreciation, and deliver enhanced financial outcomes for organizations. In fact, top companies employing a fixed asset management strategy saw a significantly higher percentage of financial reports that were 100% accurate.
Common Challenges in the Fixed Asset Lifecycle
- Challenge 1: Work-in-Progress – Project managers and fixed asset accountants need a method for tracking fixed assets before placing in service. They need a system to accurately and efficiently organize, track and monitor project details and financials while completing fixed asset works-in-progress. This includes capital projects such as assembling multicomponent equipment, upgrading machinery, building or renovating buildings, or just accumulating separate invoices prior to placing a fixed asset into service.
- Challenge 2: Acquisition and Inventory – Facility managers, department heads and fixed asset accountants need process for getting accurate baseline inventories and updated reconciliations. They’re concerned about identifying and eliminating harmful ghost and zombie assets, but they don’t have the resources to perform a physical inventory. They want a system with automated functionality that will simplify the tracking and reconciliation of their organization’s fixed assets.
- Challenge 3: Accounting and Depreciation – Fixed asset managers and executives want to take advantage of tax laws to maximize their fixed asset depreciation and minimize tax liability. They must account for, depreciate, transfer and dispose of all fixed assets to make sure they are properly identified and insured. They want an efficient system to manage the entire fixed asset lifecycle, as well as prepare year-end financial statements and tax returns, allocate costs, calculate depreciation and eliminate redundant data entry.
- Challenge 4: Comprehensive Reporting – Fixed asset managers and accountants must maintain compliance with financial accounting standards. Additionally, they must ensure accurate reporting for executive management and tax reports. They need the ability to easily create a variety of standard and custom reports, charts and graphs. To reduce inefficiencies, they also need the ability for their fixed asset system to interface with other applications and post to their general ledger system.
Watch this short video and Learn 3 Key Things About Fixed Asset Lifecycle Planning
Stop Ignoring the Elephant and Simplify Your Fixed Asset Management
Whether you’re reporting to senior management, a government agency, auditors, executive boards or the IRS, accurately tracking the varied lifecycles of your fixed assets can be a daunting task – especially when there’s so much at stake. You can’t ignore the elephant. A comprehensive lifecycle management solution like Sage Fixed Assets can help.
Are you ready to address the elephant in the room? Contact us today and see how easy it can be to simplify your fixed asset management – and your life!
(Source: Sage, Aberdeen)