Challange, Things to Consider & The Benefits Of Fixed Asset Management
Fixed asset management may not be something that companies typically list their priorities to, but having an effective fixed asset management can provide a variety of benefits that can not be missed.
It is understandable that many companies fail in this area because fixed asset management is something that not only requires a lot of effort but also requires the right process to be done effectively.
Let’s look at the common challenges the company facing , key considerations for managing fixed assets and the benefits of fixed asset management.
Often the biggest problem that companies face in managing fixed assets is the amount of data that must be managed in the absence of a policy on how we manage the data.
In addition, the company must collect data for asset acquisition, the company must be able to track repair, disposal, damage and asset transfer. Moreover, the complexity of asset management will grow significantly when dealing with various accounting rules, taxes and some tax jurisdictions.
Another problem commonly encountered is the fixed asset record that is depreciated, abandoned or discarded. This asset is commonly known as Ghost Asset. Although most fixed asset management is focused on adding new assets, it is important for companies to review asset records and remove ghost assets because they also have an important impact. Knowing the problems faced by the company is the first step in building an effective business process.
The Main Consideration
The main thing to consider in order to build effective asset management is a documented policy. Effective processes must generate trackable detail records in the asset cycle.
This policy should be able to consider all phases of the cycle and include asset recognition / capitalization procedures, record-making procedures, depreciation procedures, geographic or interdepartmental transfers, and final asset disposal procedures.
The other side of a good fixed asset policy is the right information technology to manage data. The right asset management system can vary from one company to another depending on the need. For some companies, they may feel quite simply with the use of spreadsheets in excel, while others may want to consider using the software.
In determining the right approach for a company, it is important for you to consider the complexity of your reporting needs. Here is a scenario that may require the use of fixed asset software.
- Operate in several different tax jurisdictions
- Maintenance of separate records for financial statements and tax reports
- Track assets in multiple locations
- Operations that include construction projects that require tracking of multiple components
To develop and maintain a fixed asset management system requires a lot of effort, but it will be very meaningful if you can do it well.
- A written asset recognition or capitalization policy can ensure that goods are charged or capitalized consistently
- A detailed asset-based system allows you to generate accurate financial statements within the departmental or category level set within the system and allows you to evaluate each asset to plan opportunities and maximize tax utilization.
- A strong fixed asset system allows you to calculate each asset from various jurisdictions and can easily evaluate fixed assets for tax credits and incentives.
- Helps prevent theft and loss of assets
- Removing ghost assets can prevent the payment of property and personal insurance taxes that should not happen
Regardless of how you manage your fixed assets, whether using a spreadsheet in Excel or using software though, fixed asset management is one of the management you must consider.