Auditing Fixed Assets

Your companys fixed assetsĀ are the long-term pieces of property used in the production of income, everything from office appliances to laptops to warehouse machinery. In order to keep your asset records accurate, youll need to conduct regular audits.

Without accurate asset records, your financial balance sheets will be incorrect, losses may occur, or fixed assets necessary for the continued functioning of your business may not be available when needed.

The audit process doesnt have to be difficult or time-consuming,assuming you dont still do everything manually. According to the Wasp BarcodeState of Small Business Report, an incredible 55 percent of small businesses do not track assets or use a manual process to do so.

Investing in an automated asset management solution not only provides a tool to record asset information, but many solutions include mobile capability which makes auditing of your assets simple and painless.

Fixed asset reporting is an intrinsic part of the balance sheet. If your asset records are not accurate, your balance sheet will be incorrect. This can be extremely detrimental to a company, especially where depreciation and taxation are concerned.

Inaccurate asset documentation implies there is an issue with the overall validity of transactions. If your companys fixed asset listing is considerably different than what is detailed (either in a software program or on paper reports), there is a significant problem with the process of managing your companys assets.

Both private and public companies are required to keep accurate reports for a variety of reasons. Government, charity, and educational institutions may need to classify and track asset details by funding source or grant. Having incorrect fixed asset reporting can be problematic in these situations; a non-profit organization that does not properly track its fixed assets by grant could potentially lose or be forced to repay funds.

Meanwhile, companies that pay less than they are supposed to on their taxes as a result of inaccurate accounting can still be held financially and legally liable.Small businesseswith little financial know-how are not exempt from following these rules.

Additionally, companies and organizations that depend on their fixed assets where missing or lost assets impede employee productivity are able to immediately correct asset management problems by regularly conducting thorough asset audits.

Two common issues are ghost assets and their cousins, zombie assets.Ghost assets are commonthey are assets that appear on the ledger but dont seem to exist in real life. Maybe the asset has gone missing, or has been broken down for spare parts to repair other assets. Either way, youre accounting for an asset that isnt actually contributing to your bottom line.

Zombie assets are less common, but these are assets that appear in person, not on the ledger. These just add to confusion come yearly audit time, and contribute to inaccurate records.

Fixed asset audits also determine if your company is experiencing inordinate shrinkage. If losses form a pattern and are consistent across all assets, evaluating how your assets are assigned, moved, or stored should identify the weakness within your companys asset management procedures, allowing you to address and correct those procedural gaps before your losses become too severe.

Choosing to skip auditing means you will not identify equipment loss in a timely fashion, and your company may continue to lose equipment.

According to the Department of Justice,nearly one-third of all employeescommit some degree of employee theft. And frankly, if you dont have a system in place for keeping track of your assets, you are practically inviting theftor less insidious forms of loss, such as plain accidents and forgetfulness.

Furthermore, the longer an asset is missing, the more difficult it is to trace its path a path that would lead to recovery of the asset. Timely identification of missing assets means you have greater opportunity of retrieval and less chance youll have to purchase a replacement.

Its understandable if you havent invested in asset tracking up to this pointas we saw above, plenty of businesses havent. Even big organizations, like the University of Phoenix Stadium crew (which helps manage games for the NFLs Arizona Cardinals),only recently made the switch over.

The stadium crew handles up to $100,000 worth of equipment on any given day, and previously there was no system that promised accountability, much less helped the team do their jobs in a timely manner.

After investing in a Mobile Asset system, the crew reported that they saved 20 hours of work for each event, adding up to 1,000 labor hours saved each yearwith 100 percent production accuracy to boot.

This team performs, essentially, a daily audit to make sure everything is back in its place. Most organizations dont need to be that thorough.

Auditing fixed assets is not always conducted in the same way; these audits can be as simple or as complex as deemed necessary.

Often, companies will perform simple fixed asset audits throughout the year and perform an in-depth audit at the very end of the year.

However you choose to complete the audit, the basic principle is the same:

The amounts listed on your balance sheet should match the detailed listing of your fixed asset inventory. When comparing the two, verify the following is true about each asset:

The asset has been classified correctly.

The assets purchase and/or sale dates are accurate.

In addition to the information listed above, you should also have all applicable documentation and ownership information for each asset.

By tracking your assets (location, movement, checkouts/check-ins, and disposal) with an asset management solution, you guarantee accuracy.

Every time an asset is managed that transaction should be recorded. Using barcoded asset tags makes the recording of those transactions as simple as a scan. These resulting detailed records ensure your audit is completed quickly and efficiently because you wont spend most of your time addressing discrepancies. Instead, you will simply scan the assets within a location and allow the asset tracking solution to do the data analysis.

Asset tracking solutionsthat include the use of a mobile computer and cloud computing means you can conduct an audit free of a traditional desktop computer. Walk into any or your locations, scan all of the assets, and then synchronize the mobile computer with your desktop to update your asset database.

Investing in an asset tracking solution is the first step in accurate fixed asset records; auditing those assets regularly guarantees the validity of your financial records and helps protect your company from loss.

Why Should I Invest in Asset Management Software to Track Fixed Assets?

Asset Management called upon to Serve and Protect The City of Dallas

Extinguishing Asset Management Emergencies for Volunteer Firefighters

Avoiding a School Budget Crisis with Asset Management

Shopping For an Effective Asset Management System

Brian Sutter is the Director of Marketing at Wasp, responsible for the development and execution of the companys marketing strategy. His role encompasses brand management, direct and channel marketing, public relations, advertising, and social media. He also writes and speaks on topics related to helping small business owners grow their business and improve operational efficiency.

Why Sports Stadiums Are Upping Their Inventory Management Game

What the Fidget Spinner Trend Teaches Us About Inventory Management

Filed Under:Asset Management,Small Business Magazine

Pingback:Auditing Fixed Assets Depreciation Guru()

Pingback:Extinguishing Asset Management Emergencies for Volunteer Firefighter()

Pingback:Asset Management Called Upon to Serve the City of Dallas()

Pingback:This Is How The U.S. Army Keeps Track Of Its Assets()

Pingback:What To Look For In Asset Management Software()

How Barcodes Are Powering Our Favorite Summer Events

Why Schools Investing In New Technology Must Use Asset Management

Why New Tariffs Shouldnt Affect Your Supply Chain

Risky Business: Why Your Business Needs Asset Management

The Productivity of a New Generation of Scanners

Whats Causing Such High Tax Bills For Your Small Business

Tips For Filing Your Business Taxes Last Minute

5 Reasons Why Small Businesses Need Inventory Cloud