Why Fixed Assets are important to the company?

Fixed assets are a primary key resource for businesses and can represent a significant section of the net worth captured on the balance sheet. Many organizations nowadays face a remarkable challenge to track the location, quantity, condition, maintenance and depreciation status of their fixed assets. A popular approach to fixed assets tracking uses attaching a  radio-frequency identification (RFID) tag to an asset.

Recording, maintaining, and reconciling the fixed asset account is crucial because errors can lead to inaccurate evaluation of a business consequently affecting investors, lenders, and agencies. Therefore, fixed asset tracking system seeks to track fixed assets for the purposes of  financial accounting, preventive maintenance, and theft deterrence.

Asset tracking is a major element for every company, regardless of its size. Fixed assets are defined as any ‘permanent’ object or equipment that a business uses internally to accomplish tasks. Employees may use the fixed asset that belongs to the company and must return it; therefore without an accurate method of keeping track of these fixed assets it would be very easy for a company to lose control over of them.

The manual ways of asset tracking uses Excel spreadsheet are washed away now due to the recent technological rush. It proved to be a slow method to carry out processes as well as its lack of accuracy in asset tracking of the acquisition of new fixed assets, incorrect calculation of depreciation, and the ability to easily manipulate or divert data and those are major drawbacks.

Fixed Assets

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However, with the invasion of technological advances, asset tracking software is now available that will help any size business track valuable assets such as equipment and supplies.

Fixed Asset tracking system allows companies to track what assets it owns, where each is located, who has it, when it was checked out, when it is due for return, when it is scheduled for maintenance, and the cost and depreciation of each asset.

The reporting option that is built into most fixed asset tracking system provides pre-built reports, including assets by category and department, check-in/check-out, net book value of assets, assets past due, audit history, and transactions.

All of this information is captured in one asset tracking software and can be used on computers. Consequently, companies reduce expenses through loss prevention and improved equipment maintenance. They reduce new and unnecessary equipment purchases, and they can more accurately obtain depreciation schedules.

It is worthy of notice that the benefits of a fixed asset tracking system outweigh the costs of the program. It is important, prior to purchasing an asset tracking software, that you evaluate where your business stands and where you intend it to be within the near future.

The Importance of Fixed Assets Tracking

Fixed asset registers are typically used to help business owners keep track of all their fixed assets and the details surrounding them. It assists in tracking the correct value of the fixed assets, which can be useful for managing and controlling the assets. A fixed asset register provides a single location to quickly learn about any asset owned by the business. The asset register is important for keeping track of whether or not assets are still in possession or are functioning well, and is an important way of keeping track of the value of fixed assets. It can be helpful not only for business management purposes, but should also be provided to accountants as it is an easy way for them to find information regarding the assets and their values.

In order for a fixed asset register to be successful, it is required that the information be accurate, complete, and comprehensive. To do this, it is important to make sure all assets are included in the register. To begin with one must first take a look at the balance sheet of the business. Then create a list of all the fixed assets that are listed and recorded there. These assets will typically be located under the assets section of the balance sheet.

Perform a walk-around of the business location to check and make sure all the fixed assets in the balance sheet are listed. Make remarks of any assets that are not listed. If an asset is not found in the records, it is probably because the depreciation for fixed assets is zero and is removed from the records. Meaning that the value of fixed asset has been depreciated over time until the accounting for fixed assets had no value. Not to mention that one should be sure to be thorough in this process, and keep in mind that any piece of property that is desired to be kept and not converted into cash for over a year is involved in the production of the company’s income and is considered a fixed asset.

When performing the fixed asset audit report, one should keep in mind that some important information are to be gathered, those information are:

  • Description of the asset: color, model, year of manufacturing, new, used or reconditioned this includes the location of the asset
  • Serial number: the manufacturer usually assigns these numbers giving the product a unique ID.
  • Date and price of purchase: when have you bought the asset and its price.
  • Insurance coverage: Include any details regarding the insurance policy for the asset, including broker name and company.
  • Warranty information: If applicable, including contact information for warranty provider.
  • Date asset placed in service: List the first day of usage for the asset.
  • Estimated life cycle of the asset: estimate how long you expect the item to last in years, or hours.
  • Salvage value:which is the resale value of the asset at the end of its life. In many cases, this would not apply as the asset would be used until not capable of resale.
  • Depreciation method: Depreciation refers to the reduction in the value of fixed assets over time.

Due to high governmental inspections and scrutiny, organizations are supposed to be highly transparent regarding the integrity of the financial data. Therefore, organizations should adopt a reliable system to track and manage the assets.

At the end of the day humans are only humans and they will unintentionally make mistakes. This is why you should select an appropriate depreciation period. The depreciation period is the period during which the value of fixed assets will decrease. In order to make depreciating assets easier, it is important to first know the time period the capital asset depreciation will occur within. The capital asset depreciation period is based on the projected useful life of the fixed asset.

Compose fixed asset verification reports.  Composing asset management reports and forecasts can be a complicated and daunting process for even the hardiest financial body, especially without the right tools for the job. A specialist fixed asset management system will incorporate standard and customized reporting and forecasting templates to allow quick access to and extraction of data.

Reduce and/or cease manipulation and cheating average by providing a high level of accuracy and security. A specialist fixed asset management system comes with strict security features to address issues of input errors and inaccuracies and automates the entire fixed asset management process consequently saving more time.

Fixed assets, also known as hard assets, are considered long-term assets on the balance sheet. This means that the company expects to profit from use of the asset for a long time often referred to as its useful life. However, fixed assets do have a finite useful life, and accountants must record the decline in usefulness (the assets’ value) by recording periodic fixed assets depreciation. Over time, the value of fixed assets is reduced, but financial statements will continue to use the original cost of the asset rather than its current market value. To know how much the value of fixed assets are worth at any given time, you’ll need a fixed asset tracking system.

It is well known to all companies that insurance premiums are escalating, however, in reality, the majority of businesses are actually over insured, with less than 40% of assets on the register easily identified during a physical audit and an estimated 20% no longer in existence. Endemic failure to maintain accurate asset registers results in the majority of companies insuring assets they no longer own.

Using a dedicated fixed asset management system can save a great deal of money through reducing the over-purchase of software licenses and help organizations avoid the legal risks associated with under-purchasing.

Maintenance expenses are routine periodic costs performed to protect the value of fixed assets. Unlike capital improvements, they do not increase value. You can record and maintain an up-to-date file on maintenance and service of your fixed assets to have complete maintenance records on a fixed asset easily accessible.

Each time a fixed asset is sent to service, you record all relevant information such as date of service, vendor number and service agent’s phone number.

Warranty tracking helps people track their warranty information which consequently reduces the overall cost of maintaining equipment. Not to mention that it saves time and money and improves the management and integrity of assets related information.

Physical fixed assets are continuously used in the process of production that’s why we need to check whether or not they are working properly on a regular basis. Monitoring the efficacy and efficiency of the fixed assets as well as their performance ensures a smooth workflow. Therefore, evaluating the life cycle of the assets is a must.

This fixed asset tracking system enables you to track each consignor’s item throughout the consignment cycle. With the fixed asset tracking system, you can use multiple locations for asset tracking and assign consignee for each fixed asset.

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