Fixed asset value

Fixed asset management is a fundamental business process. It determines corporate value and has a direct impact on profitability. Yet how many US organizations are truly confident in the value of corporate assets? While most have good systems in place for recording initial investments, they pay lip service at best to managing later fixed asset disposal. As a result, at least 50% of assets on the books are either so poorly described or are no longer in use, that they cannot be located during a physical audit.

Additionally, the majority of companies believe the fixed asset register is, at worst, 5% inaccurate – and are therefore shocked by the results of a complete physical asset audit. In fact, on average, physical audits reveal 40% of assets are well described on the register and can be easily found; a further 40-50% probably exist but are so poorly described it is impossible to prove, and the remaining 10-20% are well described but cannot be found, indicating they no longer exist.

When taken as a proactive move to improve accuracy, the shock can be addressed with proactive strategies to create more robust processes and information sources. Discovering the true level of asset inaccuracy in the result of a refused insurance claim or unsuccessful DR invocation can create significant business problems.

So why is there such a disconnect between the real and perceived levels of fixed asset accuracy? Are assets impossible to locate due to poor recording within the asset register, because they have changed location, or actually removed from the organization?

Up next: Lack of coordination between the fixed asset register recorded within finance