From a purely operational standpoint, having an accurate asset register that shows location, condition and the responsible contact can help ensure that assets are available and usable when needed. But how a business manages its assets also has multiple effects on the entity’s finances, through the very tangible costs of heightened insurance premiums, property taxes and neglected depreciation. These areas cannot be effectively addressed without a specialist fixed asset management solution.

Organizations that are using cumbersome spreadsheets to manage an ever-growing asset register constantly struggle to address a variety of issues surrounding the accountability and traceability of their asset base.

A recent article in The CPA Technology Advisor, Asset Management Means Much More Than Just Depreciation, emphasizes the importance of accurate asset depreciation, since assets are often one of the largest line items on a financial statement. With effective strategic management of depreciation a business can gain a more exact knowledge of its overall fiscal strength. Poor depreciation management can lead to missed tax benefits and return on investments.

The first decision a district needs to make is whether to opt for Active or Passive RFID. Passive tags are significantly cheaper

The next generation of accounting principles for entities in the U.S. is the International Financial Reporting Standards (IFRS). These standards will soon replace the existing GAAP and other traditional rules at commercial institutions, and similar requirements for public entities such as school districts will undoubtedly follow. IFRS requires greater fixed asset management accountability and the provision of a full audit trail. Unfortunately, many school districts currently use antiquated and inefficient methods, like spreadsheets, resulting in poor fixed asset management processes that result in highly inaccurate asset registers.

From highly mobile items such as laptops that cannot be accurately located, to district buses and vehicles, and even IT infrastructure that may contain multiple component parts that are frequently changed by staff without being recorded, some school districts simply have no idea what happens to many assets once they are in use.

But how can a district afford to periodically devote valuable staff time to undertake a manual audit? With staffing shortages and continuing IT and accounting needs across the organization, most simply cannot afford to spend an inordinate amount of time performing laborious asset audits. Furthermore, manual audits can be notoriously inaccurate.

The ability to use RFID technology to scan hundreds of assets at once from a single point, while ensuring the continuity of the educational mission, has the potential to transform the entire asset management process.

Approximately 35% of the bill is dedicated to tax cuts. The tax cuts are split 50/50 between personal tax cuts and business tax cuts.

Highlights of the Business Tax Cuts:

• 50% Bonus Depreciation
• No cap on total amount of assets
• Applies to all capital assets with IRS life of 20 years or less
• Assets must be purchased in calendar year 2009
• Discretionary, can opt out

Section 179 Expense Deduction:

• Can expense up to $250,000
• Total asset purchases must be capped at $800,000 or lose dollar for dollar benefit up to $1,050,000
• Assets must be purchased in fiscal year beginning in 2009

Example:
Because of the economic downturn resulting in an operating loss in 2008, Company ABC originally decided to postpone purchasing a new, more efficient label making machine. The cost of the purchasing machine is $780,000. Upon hearing of the 2009 ESA, Company ABC reevaluated their decision to postpone the purchase.

• Purchase Price $780,000
• 5 Year Life using Half Year Convention

Under Section 179 Company ABC expenses $250,000 right away to leave a new depreciable basis of $530,000. Applying the ESA 2009 bonus depreciation, Company ABC can additionally deduct $265,000 (50%), leaving a new basis of $265,000 which they can then apply the normal depreciation of $53,000 to for the first year.

After further analysis, Company ABC decides to take advantage of the tax savings and purchase the equipment in 2009, rather than take the chance that the stimulus package will be extended to 2010. They will reap tax advantages as well as the benefit of the new machine’s efficiencies in 2009. Because Company ABC is a small business with revenue under $5 million, they have an additional safety net of being able to use current losses to reduce taxes paid over the past 5 years, should they need to.

NOTE: While this reduces the taxable obligation in 2009, later years will be comparatively higher due to less depreciation expense. Also, states are not required to follow suit with Federal guidelines, therefore, depending on which states the assets are located, bonus depreciation may be required to be added back in to calculate your state taxable income.

Summary: Reducing tax obligations in the near future allows companies to invest in capital assets today, ideally allowing companies to save jobs, make money, and ultimately stimulate the economy as a whole.

RFID has been making waves for over a decade as corporate organizations sought to leverage unprecedented ease and accuracy of goods tracking to drive down costs and improve product availability. The technology is still advancing in this arena, especially with the continued decrease in pricing for the individual RFID tags, which now is as low as a few cents each. The technology has been strongly embraced by other entities, as well, including libraries, museums and higher education institutions to track valuable assets ranging from computers, to vehicles and infrastructure.

With increased focus on organizations across both public and private sectors to improve asset accountability and traceability, the time is optimal for school districts and other public entities to also consider the benefits of RFID.

But through the implementation of unified fixed asset management programs and accompanying asset tracking technologies, such as radio frequency identification (RFID), school districts and other public entities have found a proven method of managing their assets, while also reducing staff requirements, increasing accountability to school boards and government oversight, and saving money on insurance premiums by not insuring ghost assets.

The fixed asset register is key to business value in many ways. Disaster recovery strategies, business continuity plans, insurance claims and due diligence during a merger or acquisition all begin with the information recorded in the asset register.

Those businesses that recognize the need for a tailored asset management solution rather than a massive spreadsheet will not only enable maximum asset utilization and achieve a reduction in administrative cost but will be in a very strong position when the economy swings around again.

The process is cumbersome, prone to errors and provides the finance team with no insight into an asset

However, over the past decade of boom, organizations have invested heavily in new assets and equipment. Manufacturing lines have been replaced, state of the art IT kits deployed and property portfolios extended. Yet very few organizations have any real idea of where much of this asset base resides, whether it is being effectively utilized or whether it has been disposed of, despite still being depreciated on the balance sheet.

What happened to the assets that were replaced by the shiny, new equipment? Are they being used across the business – or simply left unused in a cupboard or warehouse? With no budget forthcoming for new purchases, now is the time to get an accurate handle on corporate assets to ensure maximum utilization and value.

However, over the past decade of boom, organizations have invested heavily in new assets and equipment.  Manufacturing lines have been replaced, state of the art IT kits deployed and property portfolios extended.  Yet very few organizations have any real idea of where much of this asset base resides, whether it is being effectively utilized or whether it has been disposed of, despite still being depreciated on the balance sheet.

What happened to the assets that were replaced by the shiny, new equipment?  Are they being used across the business – or simply left unused in a cupboard or warehouse?  With no budget forthcoming for new purchases, now is the time to get an accurate handle on corporate assets to ensure maximum utilization and value.

The adoption of a fixed asset register will not only streamline year-end audits and reduce reliance on specific, skilled personnel but will also provide the detailed insight into corporate assets required to attain maximum asset utilization across the business.

With many companies now reporting a capital expenditure freeze, the ability to reuse and reinvigorate existing asset value will become increasingly important as the recession bites, argues Marcus Scholes, V.P. of US Operations, Real Asset Management International.

Up next: IFRS – An Opportunity for Asset Utilizations Part One

There is little doubt that the shift the IFRS poses a major challenge for the public sector. But, with the right approach, it will prove invaluable. Best practice, improved understanding and control over the asset register will enable organizations to make far more informed decisions about capital expenditure and replacement budgeting – decisions that will have a measurable impact on audit reports.

Once established, this new set of standards will offer an astonishing level of visibility throughout the fixed asset register, maximizing business value, streamlining processes and allowing organizations across the public sector to achieve their full potential through the prudent management of resources.

With a good fixed asset register in place, organizations cannot only impose excellent control over the management of fixed assets but also streamline processes to reduce the administrative overhead – ultimately saving costs. Rather than relying on complex spreadsheets and associated costly expertise to manage new depreciation calculations and changes to the treatment of leased assets, organizations can leverage a specialist solution to dramatically reduce the month and year-end processes.

This not only drives down administrative time but also reduces the reliance upon one or two experts responsible for the creation of highly complex spreadsheets that are impenetrable to anyone else in the finance team. By leveraging simplicity and automation, organizations can deskill the fixed asset management role to gain further cost benefits. This strategy also supports the growing trend towards centralizing the finance role within a shared service center to deliver significant financial savings and meet government targets for the closure of accounts.

In addition, automated generation of reporting combined with a full audit trail significantly reduces the time taken to execute the year-end audit and confirm fixed asset values – resulting in a reduction in auditor fees.

With a good fixed asset register in place, organizations cannot only impose excellent control over the management of fixed assets but also streamline processes to reduce the administrative overhead – ultimately saving costs. Rather than relying on complex spreadsheets and associated costly expertise to manage new depreciation calculations and changes to the treatment of leased assets, organizations can leverage a specialist solution to dramatically reduce the month and year-end processes.

This not only drives down administrative time but also reduces the reliance upon one or two experts responsible for the creation of highly complex spreadsheets that are impenetrable to anyone else in the finance team. By leveraging simplicity and automation, organizations can deskill the fixed asset management role to gain further cost benefits. This strategy also supports the growing trend towards centralizing the finance role within a shared service center to deliver significant financial savings and meet government targets for the closure of accounts.

In addition, automated generation of reporting combined with a full audit trail significantly reduces the time taken to execute the year-end audit and confirm fixed asset values – resulting in a reduction in auditor fees.

While it may be tempting to carry on managing fixed assets on a spreadsheet under IFRS, this is simply not practical. The process is cumbersome, prone to errors and provides no support for the complex calculations now required across a broader asset base. Indeed, at the most basic level, most spreadsheets are simply not practical for the new volume of asset records.

Those public sector organizations that have already moved to component accounting may have achieved a greater insight into the overall asset base. But without an automated, dedicated fixed asset management system they still have no way of imposing control over this base. There is no clear audit trail, no way of linking housing grants with the relevant assets and no way of streamlining the additional complexity now associated with ongoing asset updates and replacement.

The result of switching from spreadsheets to a fixed asset management system will be to make visible a highly valuable corporate investment that is currently little more than a number on the balance sheet. Organizations that can impose control and rigor over the asset register will have a complete picture of asset location and current use; they will be able to keep track of assets - a key issue with the growth in portable assets such as IT and medical equipment. And they will be able to ensure that new equipment is not automatically purchased. Instead, existing, serviceable fixed assets can easily be located and reused where appropriate.

While it may be tempting to carry on managing fixed assets on a spreadsheet under IFRS, this is simply not practical. The process is cumbersome, prone to errors and provides no support for the complex calculations now required across a broader asset base. Indeed, at the most basic level, most spreadsheets are simply not practical for the new volume of asset records.

Those public sector organizations that have already moved to component accounting may have achieved a greater insight into the overall asset base. But without an automated, dedicated fixed asset management system they still have no way of imposing control over this base. There is no clear audit trail, no way of linking housing grants with the relevant assets and no way of streamlining the additional complexity now associated with ongoing asset updates and replacement.

The result of switching from spreadsheets to a fixed asset management system will be to make visible a highly valuable corporate investment that is currently little more than a number on the balance sheet. Organizations that can impose control and rigor over the asset register will have a complete picture of asset location and current use; they will be able to keep track of assets - a key issue with the growth in portable assets such as IT and medical equipment. And they will be able to ensure that new equipment is not automatically purchased. Instead, existing, serviceable fixed assets can easily be located and reused where appropriate.

IFRS demands that every fixed asset is broken down into its component parts, with each component having potentially different useful economic lives. And, as those organizations that have begun to make the move towards component accounting to meet the demands of IFRS have discovered, the fixed asset register jumps from, for example, a manageable 500 lines on a spreadsheet to hundreds of thousands of separate items.

This problem is especially acute for housing associations and for local authorities with large housing stocks. The move from accounting by scheme – such as each block of apartments – not just to unit level but to the components within that unit, has created a fixed asset register of unprecedented complexity.

Each component asset depreciated over different time periods and to different rules with acquisitions and refurbishments is now handled at a far more granular level. Furthermore, changes to the way Public Finance Initiatives and some operating leases are treated, will add even more fixed assets to the register.

IFRS demands that every fixed asset is broken down into its component parts, with each component having potentially different useful economic lives. And, as those organizations that have begun to make the move towards component accounting to meet the demands of IFRS have discovered, the fixed asset register jumps from, for example, a manageable 500 lines on a spreadsheet to hundreds of thousands of separate items.

This problem is especially acute for housing associations and for local authorities with large housing stocks. The move from accounting by scheme – such as each block of apartments – not just to unit level but to the components within that unit, has created a fixed asset register of unprecedented complexity.

Each component asset depreciated over different time periods and to different rules with acquisitions and refurbishments is now handled at a far more granular level. Furthermore, changes to the way Public Finance Initiatives and some operating leases are treated, will add even more fixed assets to the register.

A specialist fixed asset register is key if Public Sector entities are to reap the maximum benefits. This vital tool will not only streamline year end audits and reduce the reliance upon specific, skilled personnel but will also provide the detailed insight into corporate assets required to enhance capital expenditure decision making and improve Local Authorities’ Comprehensive Performance Assessment (CPA) scores.

IFRS Fear

The public sector is facing up to the forthcoming shift to IFRS with enthusiasm for the business benefits this will bring, despite the disruption the transition is bound to cause. The implications across the board are significant, but for the management of the asset base, the changes will have a fundamental impact on operational processes and the administrative overhead.

It seems extraordinary that so many organizations have made the painful transition to IFRS, with its associated implications for asset valuation, without recognizing the administrative overhead and inaccuracy created by reliance upon spreadsheets.

The fixed asset register is key to business value in many ways. Disaster recovery strategies, business continuity plans, insurance claims and due diligence during a merger or acquisition all begin with the information recorded in the fixed asset register.

Those businesses that recognize the need for a tailored fixed asset management solution rather than a massive spreadsheet will not only enable maximum asset utilization and achieve a reduction in administrative cost but will be in a very strong position when the economy swings around again.

It seems extraordinary that so many organizations have made the painful transition to IFRS, with its associated implications for asset valuation, without recognizing the administrative overhead and inaccuracy created by reliance upon spreadsheets.

The fixed asset register is key to business value in many ways. Disaster recovery strategies, business continuity plans, insurance claims and due diligence during a merger or acquisition all begin with the information recorded in the fixed asset register.

Those businesses that recognize the need for a tailored fixed asset management solution rather than a massive spreadsheet will not only enable maximum asset utilization and achieve a reduction in administrative cost but will be in a very strong position when the economy swings around again.

With a good fixed asset register in place, organizations can not only impose excellent control over the management of assets but also streamline processes to reduce the administrative overhead – hence saving costs. Rather than relying on complex spreadsheets – and associated expertise – to manage new depreciation calculations, and changes to the treatment of leased assets and impairments, organizations can leverage an automated solution to dramatically reduce the month and year-end process.

This not only drives down administrative time but also reduces the reliance upon one or two experts responsible for the creation of highly complex spreadsheets that are impenetrable to anyone else on the finance team. By leveraging simplicity and automation, organizations can deskill the asset management role to gain further cost benefits. This strategy also supports the growing trend towards centralizing the finance role for organizations with multiple locations or operating companies. A centralized fixed asset register supports the move to a shared service center across the entire organization, delivering significant financial savings.

In addition, automated generation of reporting combined with a full audit trail significantly reduces the time taken to undertake the year end audit and confirm the fixed asset value – resulting in a reduction in auditor fees.

With a good fixed asset register in place, organizations can not only impose excellent control over the management of assets but also streamline processes to reduce the administrative overhead – hence saving costs. Rather than relying on complex spreadsheets – and associated expertise – to manage new depreciation calculations, and changes to the treatment of leased assets and impairments, organizations can leverage an automated solution to dramatically reduce the month and year-end process.

This not only drives down administrative time but also reduces the reliance upon one or two experts responsible for the creation of highly complex spreadsheets that are impenetrable to anyone else on the finance team. By leveraging simplicity and automation, organizations can deskill the asset management role to gain further cost benefits. This strategy also supports the growing trend towards centralizing the finance role for organizations with multiple locations or operating companies. A centralized fixed asset register supports the move to a shared service center across the entire organization, delivering significant financial savings.

In addition, automated generation of reporting combined with a full audit trail significantly reduces the time taken to undertake the year end audit and confirm the fixed asset value – resulting in a reduction in auditor fees.

The problem for most organizations is that despite going through the process of moving to IFRS and adapting to the new requirements for asset accounting and revaluations, the majority of organizations are still reliant upon spreadsheets to manage the asset register.

The process is cumbersome, prone to errors and provides the finance team with no insight into an asset’s location or its current operational role within the business. Those organizations that have moved to component accounting as part of the shift to IFRS may have achieved a greater insight into the overall asset register but still have no proactive way of imposing control over this base. The result is a massive, highly valuable corporate investment that is, to all extents and purposes, visible only on the balance sheet.

Yet organizations that can impose control and rigor over the fixed asset register will be in a far better position to maximize the existing, deceptively valuable, fixed asset base. They will have a complete picture of asset location and current use; they will be able to keep track of assets – a key issue with the growth in portable IT equipment. And they will be able to ensure that new employees are not automatically purchasing brand new equipment but that existing, servicable fixed assets are reused where appropriate.

In a recession, this degree of prudence and operational control are essential. Businesses that take care of pennies on the asset register will soon start to see the dollars appearing on the balance sheet.

The problem for most organizations is that despite going through the process of moving to IFRS and adapting to the new requirements for asset accounting and revaluations, the majority of organizations are still reliant upon spreadsheets to manage the asset register.

The process is cumbersome, prone to errors and provides the finance team with no insight into an asset’s location or its current operational role within the business. Those organizations that have moved to component accounting as part of the shift to IFRS may have achieved a greater insight into the overall asset register but still have no proactive way of imposing control over this base. The result is a massive, highly valuable corporate investment that is, to all extents and purposes, visible only on the balance sheet.

Yet organizations that can impose control and rigor over the fixed asset register will be in a far better position to maximize the existing, deceptively valuable, fixed asset base. They will have a complete picture of asset location and current use; they will be able to keep track of assets – a key issue with the growth in portable IT equipment. And they will be able to ensure that new employees are not automatically purchasing brand new equipment but that existing, servicable fixed assets are reused where appropriate.

In a recession, this degree of prudence and operational control are essential. Businesses that take care of pennies on the asset register will soon start to see the dollars appearing on the balance sheet.

However, over the past decade of boom, organizations have invested heavily in new fixed assets and equipment. Manufacturing lines have been replaced, state of the art IT kit deployed and property portfolios extended. Yet very few organizations have any real idea of where much of this fixed asset base resides, whether it is being effectively utilized or whether it has been disposed of, despite still being depreciated on the balance sheet.

What happened to the fixed assets that were replaced by the shiny, new equipment? Are they being used across the business – or simply left unused in a cupboard or warehouse? With no budget forthcoming for new purchases, now is the time to get an accurate handle on corporate assets to ensure maximum utilization and value.

However, over the past decade of boom, organizations have invested heavily in new fixed assets and equipment. Manufacturing lines have been replaced, state of the art IT kit deployed and property portfolios extended. Yet very few organizations have any real idea of where much of this fixed asset base resides, whether it is being effectively utilized or whether it has been disposed of, despite still being depreciated on the balance sheet.

What happened to the fixed assets that were replaced by the shiny, new equipment? Are they being used across the business – or simply left unused in a cupboard or warehouse? With no budget forthcoming for new purchases, now is the time to get an accurate handle on corporate assets to ensure maximum utilization and value.

This latter point is particularly important for the management of complex equipment comprised of multiple components and for environments requiring the highest level of health and safety check and audit. With this technology, each assembly line manager can be tasked with maintaining a specific list of assets. Using a handheld PDA, physical audits can be done regularly. Information is directly input into the integrated fixed asset register and maintenance system and exception reports highlight any missing assets.

This implementation of RFID within Unilever demonstrates the technology’s potential for fixed asset management across every industry sector. By creating a single source of asset purchase, location, maintenance and disposal information, organizations can reduce errors and attain an immediate view of maintenance status at any time. In critical environments such as emergency services, this up-to-date information on equipment status not only saves time but also minimizes the risk of an ambulance or fire engine arriving at an incident without fully compliant equipment.

Furthermore, the process is simple and straightforward, requiring minimal resources, which drives down costs. And this is an essential point: Despite growing pressure to deliver asset accountability and traceability, organizations simply cannot afford to undertake repeated manual physical audits, each of which can take months.

By adopting RFID, not only can physical audits be done by line managers on a regular basis in a matter of minutes, without impacting the organization’s core operations in any way, but also the tight integration with the full asset history ensures unprecedented accuracy and auditability of the entire asset register.

This latter point is particularly important for the management of complex equipment comprised of multiple components and for environments requiring the highest level of health and safety check and audit. With this technology, each assembly line manager can be tasked with maintaining a specific list of assets. Using a handheld PDA, physical audits can be done regularly. Information is directly input into the integrated fixed asset register and maintenance system and exception reports highlight any missing assets.

This implementation of RFID within Unilever demonstrates the technology’s potential for fixed asset management across every industry sector. By creating a single source of asset purchase, location, maintenance and disposal information, organizations can reduce errors and attain an immediate view of maintenance status at any time. In critical environments such as emergency services, this up-to-date information on equipment status not only saves time but also minimizes the risk of an ambulance or fire engine arriving at an incident without fully compliant equipment.

Furthermore, the process is simple and straightforward, requiring minimal resources, which drives down costs. And this is an essential point: Despite growing pressure to deliver asset accountability and traceability, organizations simply cannot afford to undertake repeated manual physical audits, each of which can take months.

By adopting RFID, not only can physical audits be done by line managers on a regular basis in a matter of minutes, without impacting the organization’s core operations in any way, but also the tight integration with the full asset history ensures unprecedented accuracy and auditability of the entire asset register.

The first decision organizations need to make is whether to opt for Active or Passive RFID tags. Passive tags are significantly cheaper – around $.50, as opposed to $40 – $60 per Active tag. However, they have a limited read range and do not hold as much information, constraining the development of a single source of all asset history.

The Active tags by comparison have their own internal power source, which broadcasts the response signal to the reader. As a result, these tags have a far longer read range, typically more than 300 feet. In addition, Active tags hold far more information about the asset, enabling organizations to transform the depth and accuracy of asset history.

The additional functionality offered by Active tags convinced leading, fast moving consumer goods manufacturer, Unilever, to deploy this form of RFID technology to track 20,000 assets across several production lines at its manufacturing site in Gloucestershire, England.

With each piece of machinery comprising many distinct components, the ability to scan hundreds of assets simultaneously from a distance is a major benefit; many of these components are extremely hard to reach and would require the production line to be turned off to undertake a physical audit.

The first decision organizations need to make is whether to opt for Active or Passive RFID tags. Passive tags are significantly cheaper – around $.50, as opposed to $40 – $60 per Active tag. However, they have a limited read range and do not hold as much information, constraining the development of a single source of all asset history.

The Active tags by comparison have their own internal power source, which broadcasts the response signal to the reader. As a result, these tags have a far longer read range, typically more than 300 feet. In addition, Active tags hold far more information about the asset, enabling organizations to transform the depth and accuracy of asset history.

The additional functionality offered by Active tags convinced leading, fast moving consumer goods manufacturer, Unilever, to deploy this form of RFID technology to track 20,000 assets across several production lines at its manufacturing site in Gloucestershire, England.

With each piece of machinery comprising many distinct components, the ability to scan hundreds of assets simultaneously from a distance is a major benefit; many of these components are extremely hard to reach and would require the production line to be turned off to undertake a physical audit.

Furthermore, compliance to International Financial Reporting Standards (IFRS) demands fixed asset management accountability and the provision of a full audit trail. With IFRS becoming increasingly prevalent within the public sector, the spotlight is now on the widespread poor asset management processes that have resulted in these highly inaccurate asset registers.

From highly mobile items such as laptops that cannot be accurately located, to heavy machinery composed of multiple component parts that are frequently changed by maintenance without being recorded, organizations simply have no idea what happens to assets once in use.

But how many businesses can afford to periodically interrupt production to undertake a manual audit? Taking manufacturing processes offline or disrupting operations is just not a viable option for most businesses. Furthermore, manual audits can be notoriously inaccurate; horror stories abound of organizations that have embarked upon manual audits only to discover that many months into the exercise only 60% of assets have been checked.

Indeed, even those organizations that have adopted barcodes in a bid to impose greater control and visibility over their asset base still struggle to gain access to certain parts of the infrastructure – from production lines to clean environments such as hospital operating rooms.

The ability to use RFID technology to scan hundreds of assets at once, from a single point, while ensuring business continuity has the potential to transform the entire asset management process.

Furthermore, compliance to International Financial Reporting Standards (IFRS) demands fixed asset management accountability and the provision of a full audit trail. With IFRS becoming increasingly prevalent within the public sector, the spotlight is now on the widespread poor asset management processes that have resulted in these highly inaccurate asset registers.

From highly mobile items such as laptops that cannot be accurately located, to heavy machinery composed of multiple component parts that are frequently changed by maintenance without being recorded, organizations simply have no idea what happens to assets once in use.

But how many businesses can afford to periodically interrupt production to undertake a manual audit? Taking manufacturing processes offline or disrupting operations is just not a viable option for most businesses. Furthermore, manual audits can be notoriously inaccurate; horror stories abound of organizations that have embarked upon manual audits only to discover that many months into the exercise only 60% of assets have been checked.

Indeed, even those organizations that have adopted barcodes in a bid to impose greater control and visibility over their asset base still struggle to gain access to certain parts of the infrastructure – from production lines to clean environments such as hospital operating rooms.

The ability to use RFID technology to scan hundreds of assets at once, from a single point, while ensuring business continuity has the potential to transform the entire asset management process.

Making Waves
RFID has been making waves for over a decade as organizations throughout the supply chain look to leverage unprecedented ease and accuracy of goods tracking to drive down costs and improve product availability. But, as yet, the technology has not achieved optimal results. This is particularly relevant within the retail environment where RFID tag costs make it impractical to take the technology beyond pallet level, undermining the vision of individual product tracking from the manufacturer to the store shelf.

However, the technology has gained significant traction in other areas here in the U.S. and abroad; most notably, new passports now include RFID tags and other transportation payment systems are utilizing the tags as well.

The technology has also been embraced by libraries, museums and higher ed institutions to track valuable assets. The result of this diversification of RFID application is a significant reduction in unit cost over the last few years.

With an increased focus on organizations across both public and private sectors to improve asset accountability and traceability, isn’t it time more organizations considered the benefits of RFID?

Making Waves
RFID has been making waves for over a decade as organizations throughout the supply chain look to leverage unprecedented ease and accuracy of goods tracking to drive down costs and improve product availability.  But, as yet, the technology has not achieved optimal results. This is particularly relevant within the retail environment where RFID tag costs make it impractical to take the technology beyond pallet level, undermining the vision of individual product tracking from the manufacturer to the store shelf.

However, the technology has gained significant traction in other areas here in the U.S. and abroad; most notably, new passports now include RFID tags and other transportation payment systems are utilizing the tags as well.

The technology has also been embraced by libraries, museums and higher ed institutions to track valuable assets. The result of this diversification of RFID application is a significant reduction in unit cost over the last few years.

With an increased focus on organizations across both public and private sectors to improve asset accountability and traceability, isn’t it time more organizations considered the benefits of RFID?

Implementing a specialist fixed asset management system will provide a long-term solution to fixed asset-related SOX compliancy issues. Real Asset Management International’s (RAMI) fixed asset register, Asset4000, delivers the following:

• Improved Internal Control
• Enhanced Security Features
• Automated Forecasting & Reporting
• True Representation of Fixed Assets on Balance Sheet
• Accurate Financial Statements
• Reduced Audit Costs
• Assistance with Procedural Processes

Click here to request a detailed data sheet outlining how Asset4000 addresses fixed asset-related SOX compliance issues.

Small business owners are always looking to cut expenses where they can. But in today’s business climate, reducing outlays may be particularly important. In this column, Smart Answers shares several tips on how small companies can save on operating expenses.

Do an “asset audit.” Many businesses aren’t sure exactly what they own in fixed assets. Of course, large items like property, buildings, and manufacturing equipment are easy to keep track of says Marcus Scholes, vice-president of Real Asset Management International, a Boston software company. But technology assets such as laptops, flat screen monitors, printers, fax machines, and PDAs can easily get lost or forgotten.

“A company’s fixed assets are often one of the biggest line items on its financials, but they are often haphazardly managed,” Scholes says. Noting having a handle on your assets can be costly: You may be paying taxes and insurance premiums on items your company no longer owns.

If you haven’t done an inventory of your assets in a long time, set aside an afternoon or a Saturday and list everything your company owns. If your have a barcode system, or an earlier asset list you can start with, that will make your audit easier. If you don’t, simply walk around with a pad of paper and make note of all your assets. Don’t forget furniture, fittings, fixtures, and IT equipment.

“In our experience, up to 20% of assets on a companies’ book are no longer in existence,” Scholes says. You can estimate those items the next time your insurance is updated and when your taxes are due. “Shadow assets that lurk on asset registers but no longer actually exist are costing many businesses thousands or more per year in state property taxes,” Scholes notes.

Having an accurate, updated asset list can aid with insurance recovery in the case of a fire or other disaster, and keep your company current on the best strategy for depreciating those assets for tax purposes.

Use e-mail over postage mail whenever possible. May 12 marked the latest in a series of U.S. Postal Service price increases (BusinessWeek.com, 7/17/07), to 42 cents for a one-ounce, first-class stamp. This is the fifth increase since 2001, during which rates have gone up nearly 24%.

Combine annual increases in mail rates with the rising cost of paper, envelopes, ink, and printing, and most small companies find that doing business through postage mail is far more costly than using e-mail, .pdf files, and Wed sites, says Thomas Harpointer, chief executive of AIS Media, an interactive marketing company in Atlanta. “We’re seeing fewer companies that produce four-color, glossy brochures, informational CDs, and print catalogs these days. They are more likely to rely on digital documents, secure-login Web sites, and e-mail marketing,” he says. “A sales person can refer customers to the company’s Web site rather than mailing out a printed brochure.”

Things such as company newsletters, trade publications, and sales catalogs are all moving online as companies cut costs and respond to environmental concerns. While certain legal documents, such as contracts, may still require paper originals, many small companies can use electronic formats for most of their communications with suppliers and customers. Online marketing campaigns cost about a penny per e-mail, Harpointer says, and outsourced e-mail services providers can help gather e-mail addresses, navigate “opt-in” lists and deal with spam filters.

Return on investment is higher with e-mail marketing than it is with direct postal mail, and e-mail can be tracked, with 90% of metrics typically coming in within 48 hours of the time the campaign was launched, Harpointer says.

Manage your fuel consumption carefully. Everyone is being hit hard by the skyrocketing price of gasoline, but companies such as plumbers and florists are suffering more than most. They cannot erase fuel costs without also cutting out revenues. But they can figure out ways to reduce those costs by managing their fuel use.

Reducing drivers’ speed, training them to avoid excessive idling, and plotting our the most efficient routes can all help cut consumption, says Todd Krautkremer, CEO of Gearworks, a Minneapolis company whose fuel-management software runs on cell phones and GPS devices. Other companies, such as 4Refuel, based in British Columbia, do on-site refuelling to cut out labor time at the gas pump, and manage fuel use through strategies like regular maintenance.

“If drivers have to get to a particular customer but they don’t take the most direct route, it accounts for 3% to 10% of the company’s fuel cost,” Krautkremer says. Navigation systems and informed dispatchers also help prevent drivers from getting lost and wasting gas driving around looking for a client location.

Training drivers not to speed and monitoring their compliance can also save you money. “Going 55 mph vs. 60 saves a half-mile per gallon on fuel economy. If your company has 10 trucks travelling 100 miles a day, that’s $4,500 a year in extra fuel expense you can save by just slowing them down 5 mph,” he says.

For companies that simply cannot cut costs enough to continue business profitably, raising prices may be the only option. “This crisis we face today, particularly with gas, is not something the company owner feels alone. Individuals feel it too, because they are filling up their own tanks. So your customers may be more sympathetic to your price increase than they would be in another situation,” Krautkremer says.

Karen E. Klein is a business journalist who covers small-business issues for several national publications. She writes her Smart Answers column twice a week.

For districts and risk pools required to carry their own insurance, having “ghost assets” on the books can add considerably to premiums, but they also detract from effectively planning and allocating assets. For instance, if a few of a school districts buses are in a state of total despair and are just sitting in the transportation yard being used for junk parts, but the financial administrator has them listed on the books as being in operable condition, then the distribution of the buses and resource planning are obviously affected, along with the financial planning for replacement of the units.

A unified asset management system eliminates these problems by providing a centralized asset register that is used by any of the parties who use or need information on assets, with interfaces designed for each kind of user, from maintenance staff who record asset condition, to IT staff who track the location of computers and servers, to financial managers who need an overview of the real condition of these items for reporting and planning. A unified database will provide a full-time audit trail that helps ensure compliance and also saves time otherwise lost to reconciliation of multiple asset lists.

Calls for greater accountability will only continue, as will increasing oversight by regulatory agencies. Implementing an automated asset management system can help a school district proactively strengthen its finances and maintain compliance with GASB 34 and other regulations, it can also give the benefit of time-saving efficiencies and heightened awareness of the condition and location of the district’s assets.

For districts and risk pools required to carry their own insurance, having “ghost assets” on the books can add considerably to premiums, but they also detract from effectively planning and allocating assets. For instance, if a few of a school districts buses are in a state of total despair and are just sitting in the transportation yard being used for junk parts, but the financial administrator has them listed on the books as being in operable condition, then the distribution of the buses and resource planning are obviously affected, along with the financial planning for replacement of the units.

A unified asset management system eliminates these problems by providing a centralized asset register that is used by any of the parties who use or need information on assets, with interfaces designed for each kind of user, from maintenance staff who record asset condition, to IT staff who track the location of computers and servers, to financial managers who need an overview of the real condition of these items for reporting and planning. A unified database will provide a full-time audit trail that helps ensure compliance and also saves time otherwise lost to reconciliation of multiple asset lists.

Calls for greater accountability will only continue, as will increasing oversight by regulatory agencies. Implementing an automated asset management system can help a school district proactively strengthen its finances and maintain compliance with GASB 34 and other regulations, it can also give the benefit of time-saving efficiencies and heightened awareness of the condition and location of the district’s assets.

Over the past few decades, the call for government financial accountability at the state and local levels has led to increased compliance-related issues for these entities, including public school districts across the country. Over the same timeframe, many of these districts have also faced the challenges of decreasing budgets and staff, leaving them required to do more with less, and the effects have been felt by school districts large and small.

Some district managers, however, have found relief in at least one major area: tracking and management of their fixed assets. These assets, ranging from school buses, real estate, buildings, IT equipment and even desks and lockers, often represent the largest capital expenditures for districts. Tracking infrastructure assets (water and sewer systems, roads, bridges, lighting systems, etc.) is now a requirement under the provisions of GASB 34, in which the Government Accounting Standards Board outlines the reporting responsibilities of state and local governments, including school districts. The purpose of this regulation, which was enacted in 1999, is “to improve the accountability of governments to their citizens by providing better, more accessible information about the condition and costs of capital assets.”

But accurately tracking and managing assets is also vital to keeping firm control over a district’s fiscal policy and more prudently allocating limited budgets and resources, since it allows administrators and maintenance staff to more effectively care for and replace assets on a scheduled basis, or to retain assets whose life span can be extended.

Until recently, managing assets was often a tedious task that required multiple spreadsheets designed for each department (finance, maintenance, IT), which extended the limited time of administrative staff. Fortunately, technology has caught up with the needs of these administrators, and automated asset management programs now provide a more unified method that speeds tracking and maintenance tasks, while also integrating with districts’ ERP or other financial management systems and providing all necessary reporting for state and federal compliance purposes.

Over the past few decades, the call for government financial accountability at the state and local levels has led to increased compliance-related issues for these entities, including public school districts across the country. Over the same timeframe, many of these districts have also faced the challenges of decreasing budgets and staff, leaving them required to do more with less, and the effects have been felt by school districts large and small.

Some district managers, however, have found relief in at least one major area: tracking and management of their fixed assets. These assets, ranging from school buses, real estate, buildings, IT equipment and even desks and lockers, often represent the largest capital expenditures for districts. Tracking infrastructure assets (water and sewer systems, roads, bridges, lighting systems, etc.) is now a requirement under the provisions of GASB 34, in which the Government Accounting Standards Board outlines the reporting responsibilities of state and local governments, including school districts. The purpose of this regulation, which was enacted in 1999, is “to improve the accountability of governments to their citizens by providing better, more accessible information about the condition and costs of capital assets.”

But accurately tracking and managing assets is also vital to keeping firm control over a district’s fiscal policy and more prudently allocating limited budgets and resources, since it allows administrators and maintenance staff to more effectively care for and replace assets on a scheduled basis, or to retain assets whose life span can be extended.

Until recently, managing assets was often a tedious task that required multiple spreadsheets designed for each department (finance, maintenance, IT), which extended the limited time of administrative staff. Fortunately, technology has caught up with the needs of these administrators, and automated asset management programs now provide a more unified method that speeds tracking and maintenance tasks, while also integrating with districts’ ERP or other financial management systems and providing all necessary reporting for state and federal compliance purposes.

ROI is a performance measurement used to evaluate the efficiency of an investment. In mathematical terms, it’s the overall benefit of an investment, divided by the actual cost of the investment; a simple calculation expressed as a percentage. ROI calculations make side-by-side comparisons very simple, as long as the same components are used to calculate costs.

Studies have shown that due to a lack of confidence in calculating ROI, the majority of companies do not even calculate an ROI before investing in software. Of those that do, it’s often only done at the start of the project to justify spend, and never recalculated for proper measurement following implementation.

In order to calculate the ROI for your fixed asset management software purchase, you must first determine the costs and benefits. To do this, you need a measurable baseline of your current system/procedures for comparison.

First, calculate time spent on fixed asset accounting for all duties involved in the process; this should include:

- Report generation
- Data entry and verification
- Accounting events, entries (disposals, transfers, etc.)
- Monthly and yearly book closings
- Journal postings
- Conducting physical inventories

Second, subtract costs associated with your current fixed asset management procedures from actual costs associated with Asset4000; this will leave you with a component of the benefit.

When calculating costs, be sure to include all costs involved and not just those associated with the actual software. You may want to consider the following:

- Salaries and benefits of employees involved in the project
(daily or hourly, depending on project scope).
- Employee overhead, i.e. supplies and equipment,
- Direct costs, T&E, third parties, etc.
- Lost opportunities; did the person on this project
suffer a loss, i.e. potential sales?

The above costs should be calculated for all periods from initial project delivery to ‘Go Live’ date, then going forward when necessary.

Example ROI Calculation for ABC Company:

Facts:
2,500 Assets
GBV = $2,500,000 (average asset cost = $1,000)
NBV = $1,250,000

Calculation of Benefits:

Current Scenario

Accountant I spends 25 hours per month manually entering data into an Access(R) database, generating reports, and processing transfers and disposals on a monthly basis. Based on a total, yearly salary of $65,000 (includes benefits and overhead costs), divided by 2080 total working hours per year, the hourly cost works out to around $32.00.

Annual cost for Accountant I = $9,600 ($32.00 X 25 hours X 12 months)

Accountant II spends 30 hours per month performing asset splits and more complex accounting events, producing depreciation calculations, posting to the G/L, closing books and generating senior management reports on a monthly basis. Based on a total, yearly salary of $80,000 (inculdes benefits and overhead costs), divided by 2080 total working hours per year, the hourly cost works out to around $39.00.

Annual cost for Accountant II = $14,040 ($39.00 X 30 hours X 12 months)

ABC Company has not conducted a complete physical audit in four years. Two members of the maintenance department and two members of the IT department performed the last physical audit. The inventory audit was completed with pencil and paper over a two day period; total costs came to $2,000. During that two-day period, the IT helpdesk and maintenance work order support fell behind schedule.

Current Total Costs = $25,640 ($9,600 + $14,040 + $2,000)

Proposed Scenario

ABC Company’s new fixed asset and inventory tracking software provides a built-in link to its e-Procurement system, eliminating data entry time for Accountant I. The new system’s built-in report writer generates reports quickly and easily. Transfers and disposals are also completed with the click of a mouse, generating a full audit trail. Time spent on these tasks is dramatically reduced by 60 percent.

Accountant I costs lowered to = $3,840 ($9,600 – 60% or $5,760)

Accountant II also realizes significant time savings since asset splits and other complex accounting events are also now completed quickly and easily. Calculating and posting depreciation and closing books can now be accomplished with a few clicks of a mouse. Senior management reports that previously required research and pivot tables are now just the push of a button away. Time spent on these tasks is dramatically reduced by 60 percent.

Accountant II costs lowered to = $5,616 ($14,040 – 60% or $8,424)

With Track4000, accurate physical audits are completed in no time at all, typically in about 65 percent less time than it takes with pen and paper.

Total Audit Cost = $700 ($2,000 – 65% or $1,300)

Proposed Total Costs = $10,156 ($3,840 + $5,616 + $700)

Total Benefits: $15.484 ($25,640 – $10,156)

Furthermore, after completing its latest physical audit, ABC Company was unable to locate 10 percent of its assets; refer to the company facts above:

Cost of ghost assets = $250,000 (250 X $1,000)

Writing off the NBV associated with the ghost assets on the register, assuming a 39 percent corporate tax rate, results in a significant tax overpayment.

Income tax overpayment = $48,750 (39% of $125,000)

At a five percent property tax rate, the property tax overpayment is significant as well.

Property tax overpayment = $6,250 (5% of $125,000)

Lastly, at $.01 for every $1.00 of assets, there is a hefty insurance premium overpayment.

Insurance premium overpayment = $1,250 ($.01 X $125,000)

Total Overpayment (Tax + Insurance) = $56,250 ($48,750 + $6,250 + $1,250)

Total Benefits + Tax and Insurance Savings: $71,734 ($56,250 + $15,484)

Actual project costs = $20,000

Additional project costs include planning, research, analysis, selection, approval and purchase; this is based on a total of 80 hours and an average hourly rate of $42.00.

Additional project costs = $3,360 (80 X $42.00)

Total New Project Costs: $23,360 ($20,000 + $3,360)

Results:
ROI (Excluding Tax and Insurance Savings) = $15,484 / $23,360 = 66%
ROI (Including Tax and Insurance Savings) = $71,734 / $23,360 = 307%
Payback = 1.5 Years
Payback (Including Tax and Insurance Savings) = 4 Months

*Labor Costs & Annual Support are based on an annual increase of 5%

Summary
If you are looking to justify the implementation of a fixed asset management system, take some time to detail the deficiencies in your current processes and utilize the template above to calculate ROI for the project. This is a beneficial exercise for organizations in any stage of the fixed asset management software review process.

Fixed asset management is critical to the fiscal health of all opertations; frequent and effective fixed asset management processes could potentially save your organization hundreds of thousands of dollars a year.

In addition to the hard facts (your ROI calculation), there are several other, intangible benefits involved in running a comprehensive fixed asset management system. To learn more, please contact Real Asset Management International (RAMI) today at 617 342 7291 or solution@realassetmgt.com.

ROI is a performance measurement used to evaluate the efficiency of an investment. In mathematical terms, it’s the overall benefit of an investment, divided by the actual cost of the investment; a simple calculation expressed as a percentage. ROI calculations make side-by-side comparisons very simple, as long as the same components are used to calculate costs.

Studies have shown that due to a lack of confidence in calculating ROI, the majority of companies do not even calculate an ROI before investing in software. Of those that do, it’s often only done at the start of the project to justify spend, and never recalculated for proper measurement following implementation.

In order to calculate the ROI for your fixed asset management software purchase, you must first determine the costs and benefits. To do this, you need a measurable baseline of your current system/procedures for comparison.

First, calculate time spent on fixed asset accounting for all duties involved in the process; this should include:

- Report generation
- Data entry and verification
- Accounting events, entries (disposals, transfers, etc.)
- Monthly and yearly book closings
- Journal postings
- Conducting physical inventories

Second, subtract costs associated with your current fixed asset management procedures from actual costs associated with Asset4000; this will leave you with a component of the benefit.

When calculating costs, be sure to include all costs involved and not just those associated with the actual software. You may want to consider the following:

- Salaries and benefits of employees involved in the project
(daily or hourly, depending on project scope).
- Employee overhead, i.e. supplies and equipment,
- Direct costs, T&E, third parties, etc.
- Lost opportunities; did the person on this project
suffer a loss, i.e. potential sales?

The above costs should be calculated for all periods from initial project delivery to ‘Go Live’ date, then going forward when necessary.

Example ROI Calculation for ABC Company:

Facts:
2,500 Assets
GBV = $2,500,000 (average asset cost = $1,000)
NBV = $1,250,000

Calculation of Benefits:

Current Scenario

Accountant I spends 25 hours per month manually entering data into an Access(R) database, generating reports, and processing transfers and disposals on a monthly basis. Based on a total, yearly salary of $65,000 (includes benefits and overhead costs), divided by 2080 total working hours per year, the hourly cost works out to around $32.00.

Annual cost for Accountant I = $9,600 ($32.00 X 25 hours X 12 months)

Accountant II spends 30 hours per month performing asset splits and more complex accounting events, producing depreciation calculations, posting to the G/L, closing books and generating senior management reports on a monthly basis. Based on a total, yearly salary of $80,000 (inculdes benefits and overhead costs), divided by 2080 total working hours per year, the hourly cost works out to around $39.00.

Annual cost for Accountant II = $14,040 ($39.00 X 30 hours X 12 months)

ABC Company has not conducted a complete physical audit in four years. Two members of the maintenance department and two members of the IT department performed the last physical audit. The inventory audit was completed with pencil and paper over a two day period; total costs came to $2,000. During that two-day period, the IT helpdesk and maintenance work order support fell behind schedule.

Current Total Costs = $25,640 ($9,600 + $14,040 + $2,000)

Proposed Scenario

ABC Company’s new fixed asset and inventory tracking software provides a built-in link to its e-Procurement system, eliminating data entry time for Accountant I. The new system’s built-in report writer generates reports quickly and easily. Transfers and disposals are also completed with the click of a mouse, generating a full audit trail. Time spent on these tasks is dramatically reduced by 60 percent.

Accountant I costs lowered to = $3,840 ($9,600 – 60% or $5,760)

Accountant II also realizes significant time savings since asset splits and other complex accounting events are also now completed quickly and easily. Calculating and posting depreciation and closing books can now be accomplished with a few clicks of a mouse. Senior management reports that previously required research and pivot tables are now just the push of a button away. Time spent on these tasks is dramatically reduced by 60 percent.

Accountant II costs lowered to = $5,616 ($14,040 – 60% or $8,424)

With Track4000, accurate physical audits are completed in no time at all, typically in about 65 percent less time than it takes with pen and paper.

Total Audit Cost = $700 ($2,000 - 65% or $1,300)

Proposed Total Costs = $10,156 ($3,840 + $5,616 + $700)

Total Benefits: $15.484 ($25,640 – $10,156)

Furthermore, after completing its latest physical audit, ABC Company was unable to locate 10 percent of its assets; refer to the company facts above:

Cost of ghost assets = $250,000 (250 X $1,000)

Writing off the NBV associated with the ghost assets on the register, assuming a 39 percent corporate tax rate, results in a significant tax overpayment.

Income tax overpayment = $48,750 (39% of $125,000)

At a five percent property tax rate, the property tax overpayment is significant as well.

Property tax overpayment = $6,250 (5% of $125,000)

Lastly, at $.01 for every $1.00 of assets, there is a hefty insurance premium overpayment.

Insurance premium overpayment = $1,250 ($.01 X $125,000)

Total Overpayment (Tax + Insurance) = $56,250 ($48,750 + $6,250 + $1,250)

Total Benefits + Tax and Insurance Savings: $71,734 ($56,250 + $15,484)

Actual project costs = $20,000

Additional project costs include planning, research, analysis, selection, approval and purchase; this is based on a total of 80 hours and an average hourly rate of $42.00.

Additional project costs = $3,360 (80 X $42.00)

Total New Project Costs: $23,360 ($20,000 + $3,360)

Results:
ROI (Excluding Tax and Insurance Savings) = $15,484 / $23,360 = 66%
ROI (Including Tax and Insurance Savings) = $71,734 / $23,360 = 307%
Payback = 1.5 Years
Payback (Including Tax and Insurance Savings) = 4 Months

*Labor Costs & Annual Support are based on an annual increase of 5%

Summary
If you are looking to justify the implementation of a fixed asset management system, take some time to detail the deficiencies in your current processes and utilize the template above to calculate ROI for the project. This is a beneficial exercise for organizations in any stage of the fixed asset management software review process.

Fixed asset management is critical to the fiscal health of all opertations; frequent and effective fixed asset management processes could potentially save your organization hundreds of thousands of dollars a year.

In addition to the hard facts (your ROI calculation), there are several other, intangible benefits involved in running a comprehensive fixed asset management system. To learn more, please contact Real Asset Management International (RAMI) today at 617 342 7291 or solution@realassetmgt.com.

Fixed asset management is an accounting process used to track fixed assets for the purpose of financial accounting (depreciation). Many companies also elect to track the whereabouts, quantity, condition and maintenance records relating to fixed assets for tax and insurance purposes.

Key Drivers for Implementing a Fixed Asset Solution
From a purely operational standpoint, having an accurate asset register that shows location, condition and the responsible contact can help ensure that assets are available and usable when needed. But how a business manages its assets also has multiple effects on the entity’s finances, through the very tangible costs of heightened insurance premiums, property taxes and neglected depreciation. These areas cannot be effectively addressed without a specialized fixed asset management solution.

Organizations that are using cumbersome spreadsheets to manage an ever-growing asset register constantly struggle to address a variety of issues surrounding the accountability and traceability of their asset base. The following are just some of the many areas in which businesses, without a comprehensive fixed asset management system, are failing to address:

Corporate governance requirements
(SOX, CSOX, US Tax, GAAP, SAS 70, IFRS, etc.)
Today, companies of all sizes are subject to increased scrutiny by government agencies and regulatory boards reacting to recent business reports and investor’s requests for higher standards of accountability, transparency and overall corporate behavior. The main goal here is to improve financial management, reporting and corporate governance. With such a high degree of attention focused on your organization, why would you risk the integrity of your financial data by relying solely on spreadsheets? Accurate and effective implementation, management, monitoring and updating can easily be accomplished with a specialist fixed asset management system in place; it’s the only real way to ensure compliance.

Inaccurate depreciation calculations
It is a proven fact that nearly all spreadsheets contain errors, which is to be expected with information entered by hand. Whether it be the background asset data or the formula itself, there’s little doubt that depreciation calculations, when based on a spreadsheet, are likely to be inaccurate. Several people within one accounting department will often access, manage and edit the same spreadsheet, making errors even more likely.

A specialist fixed asset management system will eliminate costly depreciation errors. Depreciation formulas and asset lives can be defaulted for each book based on any defined asset category. Processing depreciation this way is both quick and easy, completed with just a click of a button.

Lack of an audit trail and overall security
A specialist fixed asset management system will track and record every detail of every action ever made by any user, which is unattainable with spreadsheets. Dates, times and explanations are recorded as well, making it very simple to ensure the security and integrity of your asset data. A specialist system will require a valid username and password combination to enter the system and will enable department heads to define security at an individual level to ensure that confidential information can only be viewed by those who need to see it and safely hidden from those who don’t. In other words, limited access can by set by user in order to restrict read only and editing rights.

Inability to link ‘parent/child’ assets or conduct asset splits,
batch disposals, etc.
The ability to link ‘parent/child’ assets is key in order to establish hierarchical relationships and dependencies. A specialist fixed asset management system will display such links pictorially in collapsible branches. A typical example of this might be the association between a PC and software license, where the PC is the ‘parent’ and the license assumes the role of the ‘child’. The option to transfer or dispose of the ‘child’ asset will subsequently follow the transfer or disposal of the ‘parent’ asset, keeping the relationship intact.

For obvious reasons, spreadsheets are unable to accommodate ‘parent/child’ asset relationships in such a way, making it difficult to accurately track and manage these important hierarchical dependencies. The ability to conduct automated asset splits and batch disposals will provide similar benefits.

Access to multi-currency, multi-lingual or multi-book capabilities
If your organization operates in many different countries then multi-currency, multi-lingual and multi-book capabilities are most likely imperative in your fixed asset management procedures. A specialist fixed asset management system will have multi-book capabilities to allow core asset information to be shared across any number of books with different sets of figures, enabling compliance with both local and group depreciation policies. Vital information (such as analysis codes, descriptions, acquisitions and capitalization dates, etc. ) can remain constant across all books while details like asset life, depreciation rules and residual vales can be book dependent. As far as multi-currency capabilities go, a specialist system will allow each accounting book to be independently configured to meet international accounting standards. Within the asset register, each office location should be able to record and report on its own assets in local currency. User-defined exchange rates will allow the parent company to easily view and report on the same values in USD.

Unable to meet historical reporting and forecasting requirements
Composing reports and forecasts can be a complicated and daunting process, especially if attempted in a spreadsheet. The data produced is far too important to chance inaccuracies. A specialist fixed asset management system will incorporate standard and customized reporting and forecasting templates to ensure an intuitive method of extracting and analyzing asset data.

Wasted time on tedious tasks such as data entry
Entering and maintaining asset data becomes an endless task when working within the parameters of a spreadsheet. A specialist system will automate the entire fixed asset management process. From data import capabilities to automated reports and forecasts, a significant amount of valuable time can be shaved off the entire process.

Lack of confidence in data integrity
Total control over your fixed asset management data simply cannot be achieved through the use of a spreadsheet. Whether a user input error or unintentional miscalculation, inaccuracies within your fixed asset register are inevitable. With that said, how can you be 100% confident in the integrity of this vital data? A specialist fixed asset management system will have strict security features in place to effortlessly address the issue.

Fixed asset management is an accounting process used to track fixed assets for the purpose of financial accounting (depreciation). Many companies also elect to track the whereabouts, quantity, condition and maintenance records relating to fixed assets for tax and insurance purposes.

Key Drivers for Implementing a Fixed Asset Solution
From a purely operational standpoint, having an accurate asset register that shows location, condition and the responsible contact can help ensure that assets are available and usable when needed. But how a business manages its assets also has multiple effects on the entity’s finances, through the very tangible costs of heightened insurance premiums, property taxes and neglected depreciation. These areas cannot be effectively addressed without a specialized fixed asset management solution.

Organizations that are using cumbersome spreadsheets to manage an ever-growing asset register constantly struggle to address a variety of issues surrounding the accountability and traceability of their asset base. The following are just some of the many areas in which businesses, without a comprehensive fixed asset management system, are failing to address:

Corporate governance requirements
(SOX, CSOX, US Tax, GAAP, SAS 70, IFRS, etc.)
Today, companies of all sizes are subject to increased scrutiny by government agencies and regulatory boards reacting to recent business reports and investor’s requests for higher standards of accountability, transparency and overall corporate behavior. The main goal here is to improve financial management, reporting and corporate governance. With such a high degree of attention focused on your organization, why would you risk the integrity of your financial data by relying solely on spreadsheets? Accurate and effective implementation, management, monitoring and updating can easily be accomplished with a specialist fixed asset management system in place; it’s the only real way to ensure compliance.

Inaccurate depreciation calculations
It is a proven fact that nearly all spreadsheets contain errors, which is to be expected with information entered by hand. Whether it be the background asset data or the formula itself, there’s little doubt that depreciation calculations, when based on a spreadsheet, are likely to be inaccurate. Several people within one accounting department will often access, manage and edit the same spreadsheet, making errors even more likely.

A specialist fixed asset management system will eliminate costly depreciation errors. Depreciation formulas and asset lives can be defaulted for each book based on any defined asset category. Processing depreciation this way is both quick and easy, completed with just a click of a button.

Lack of an audit trail and overall security
A specialist fixed asset management system will track and record every detail of every action ever made by any user, which is unattainable with spreadsheets. Dates, times and explanations are recorded as well, making it very simple to ensure the security and integrity of your asset data. A specialist system will require a valid username and password combination to enter the system and will enable department heads to define security at an individual level to ensure that confidential information can only be viewed by those who need to see it and safely hidden from those who don’t. In other words, limited access can by set by user in order to restrict read only and editing rights.

Inability to link ‘parent/child’ assets or conduct asset splits,
batch disposals, etc.
The ability to link ‘parent/child’ assets is key in order to establish hierarchical relationships and dependencies. A specialist fixed asset management system will display such links pictorially in collapsible branches. A typical example of this might be the association between a PC and software license, where the PC is the ‘parent’ and the license assumes the role of the ‘child’. The option to transfer or dispose of the ‘child’ asset will subsequently follow the transfer or disposal of the ‘parent’ asset, keeping the relationship intact.

For obvious reasons, spreadsheets are unable to accommodate ‘parent/child’ asset relationships in such a way, making it difficult to accurately track and manage these important hierarchical dependencies. The ability to conduct automated asset splits and batch disposals will provide similar benefits.

Access to multi-currency, multi-lingual or multi-book capabilities
If your organization operates in many different countries then multi-currency, multi-lingual and multi-book capabilities are most likely imperative in your fixed asset management procedures. A specialist fixed asset management system will have multi-book capabilities to allow core asset information to be shared across any number of books with different sets of figures, enabling compliance with both local and group depreciation policies. Vital information (such as analysis codes, descriptions, acquisitions and capitalization dates, etc. ) can remain constant across all books while details like asset life, depreciation rules and residual vales can be book dependent. As far as multi-currency capabilities go, a specialist system will allow each accounting book to be independently configured to meet international accounting standards. Within the asset register, each office location should be able to record and report on its own assets in local currency. User-defined exchange rates will allow the parent company to easily view and report on the same values in USD.

Unable to meet historical reporting and forecasting requirements
Composing reports and forecasts can be a complicated and daunting process, especially if attempted in a spreadsheet. The data produced is far too important to chance inaccuracies. A specialist fixed asset management system will incorporate standard and customized reporting and forecasting templates to ensure an intuitive method of extracting and analyzing asset data.

Wasted time on tedious tasks such as data entry
Entering and maintaining asset data becomes an endless task when working within the parameters of a spreadsheet. A specialist system will automate the entire fixed asset management process. From data import capabilities to automated reports and forecasts, a significant amount of valuable time can be shaved off the entire process.

Lack of confidence in data integrity
Total control over your fixed asset management data simply cannot be achieved through the use of a spreadsheet. Whether a user input error or unintentional miscalculation, inaccuracies within your fixed asset register are inevitable. With that said, how can you be 100% confident in the integrity of this vital data? A specialist fixed asset management system will have strict security features in place to effortlessly address the issue.

Indeed, while the IT department may well be ahead of the game in achieving ethical purchase and disposal, the green value will be lost if the rest of the business is failing to follow suit. It is only by creating a single, centralized asset register with consistent definitions and recording practices that an organization can track its progress and drive forward environmental policies.

As the green imperative evolves from corporate choice to operation necessity, organizations need to put the right building blocks in place to support, track and monitor performance. By 2011, Gartner predicts that suppliers to large enterprises will need to prove their green credentials via an audited process to retain preferred supplier status. This will simply be impossible with today’s fragmented approach to recording asset information.

The days of carefree green statements are coming to an end; organizations with irresponsible environmental practices will be exposed. There are several reasons for an organization to clean up its asset register, but without doubt those organizations that persist in inaccurate recording of assets will rapidly discover the true value of ethical business practices.

Indeed, while the IT department may well be ahead of the game in achieving ethical purchase and disposal, the green value will be lost if the rest of the business is failing to follow suit. It is only by creating a single, centralized asset register with consistent definitions and recording practices that an organization can track its progress and drive forward environmental policies.

As the green imperative evolves from corporate choice to operation necessity, organizations need to put the right building blocks in place to support, track and monitor performance. By 2011, Gartner predicts that suppliers to large enterprises will need to prove their green credentials via an audited process to retain preferred supplier status. This will simply be impossible with today’s fragmented approach to recording asset information.

The days of carefree green statements are coming to an end; organizations with irresponsible environmental practices will be exposed. There are several reasons for an organization to clean up its asset register, but without doubt those organizations that persist in inaccurate recording of assets will rapidly discover the true value of ethical business practices.

According to Gartner’s Top Predictions for IT Organizations and Users, 2008 and Beyond: Going Green and Self-Healing, by 2010, 75% of organizations will use full lifecycle energy and CO2 footprint as mandatory PC hardware buying criteria. As a result, the IT analyst group expects that most technology suppliers will start some level of more detailed lifecycle assessment during 2008. The area of carbon accounting, tracking and product labeling (beyond IT) will explode over the next two years.

In the short term, this process will be complex, oversimplified and crude and it will lack standards, creating a limited impact until at least 2010. However, Gartner believes, regardless of the lack of appropriate standards and common metrics, enterprises will demand the information.

However, to be used effectively, organizations need a clear and coherent method of recording, measuring and reporting on the lifecycle of each asset, particularly on energy consumed during manufacturing and distribution processes, and used for IT equipment.

The Ethical Asset Register
This could prove to be a major stumbling block for organizations. Currently, the majority of companies do not even accurately record the number and location of assets, let along their purchasing and maintenance history. In a recent survey of 300 data center managers, over a quarter of respondents did not know how many servers were under their control and more than 40% found they had servers they did not know they had or had looked for one only to find it had been retired.

And this problem is far from limited to the IT asset register. Physical audits of the asset base typically reveal that less than 40% of the assets on the register are easily identified and an estimated 10% are no longer in existence. The problem is often made worse because of varying asset tracking strategies and consistently poor record keeping.

With each department typically recording asset information differently – often on spreadsheets or even paper files – there are no common asset definitions. There is rarely any integration with maintenance, resulting in highly inaccurate information on the replacement of component parts, and few organizations even bother to record the movement of assets around or between buildings.

With this fragmented approach, organizations have no way of accurately and consistently recording or reporting on the key information required to support CSR strategies – from knowing an asset’s country of origin, to how the product was made, what materials it is made from, maintenance schedules and final, environmentally ethical, disposal.

Accurate records will also ensure that an asset’s life is as long as possible. Companies with a loose grasp on which assets are ready for disposal are far more likely to dispose of assets prematurely which can in turn impact the environment through unnecessary waste and recycling. In addition to this, any changes to the value of an asset throughout its lifecycle should always be reflected financially within the business allowing for correct calculation of depreciation. Failure to do this simply undermines business value.

Without a consistent, corporation-wide approach to recording comprehensive fixed asset information, organizations will not be able to accurately report on their asset performance, whether for fiscal or for environmental concerns such as carbon emissions and recycling figures. It is only by capturing increasing detail about an asset’s lifecycle that organizations can begin to provide the corporate visibility required to underpin CSR strategies.

According to Gartner’s Top Predictions for IT Organizations and Users, 2008 and Beyond: Going Green and Self-Healing, by 2010, 75% of organizations will use full lifecycle energy and CO2 footprint as mandatory PC hardware buying criteria. As a result, the IT analyst group expects that most technology suppliers will start some level of more detailed lifecycle assessment during 2008. The area of carbon accounting, tracking and product labeling (beyond IT) will explode over the next two years.

In the short term, this process will be complex, oversimplified and crude and it will lack standards, creating a limited impact until at least 2010. However, Gartner believes, regardless of the lack of appropriate standards and common metrics, enterprises will demand the information.

However, to be used effectively, organizations need a clear and coherent method of recording, measuring and reporting on the lifecycle of each asset, particularly on energy consumed during manufacturing and distribution processes, and used for IT equipment.

The Ethical Asset Register
This could prove to be a major stumbling block for organizations. Currently, the majority of companies do not even accurately record the number and location of assets, let along their purchasing and maintenance history. In a recent survey of 300 data center managers, over a quarter of respondents did not know how many servers were under their control and more than 40% found they had servers they did not know they had or had looked for one only to find it had been retired.

And this problem is far from limited to the IT asset register. Physical audits of the asset base typically reveal that less than 40% of the assets on the register are easily identified and an estimated 10% are no longer in existence. The problem is often made worse because of varying asset tracking strategies and consistently poor record keeping.

With each department typically recording asset information differently – often on spreadsheets or even paper files – there are no common asset definitions. There is rarely any integration with maintenance, resulting in highly inaccurate information on the replacement of component parts, and few organizations even bother to record the movement of assets around or between buildings.

With this fragmented approach, organizations have no way of accurately and consistently recording or reporting on the key information required to support CSR strategies – from knowing an asset’s country of origin, to how the product was made, what materials it is made from, maintenance schedules and final, environmentally ethical, disposal.

Accurate records will also ensure that an asset’s life is as long as possible. Companies with a loose grasp on which assets are ready for disposal are far more likely to dispose of assets prematurely which can in turn impact the environment through unnecessary waste and recycling. In addition to this, any changes to the value of an asset throughout its lifecycle should always be reflected financially within the business allowing for correct calculation of depreciation. Failure to do this simply undermines business value.

Without a consistent, corporation-wide approach to recording comprehensive fixed asset information, organizations will not be able to accurately report on their asset performance, whether for fiscal or for environmental concerns such as carbon emissions and recycling figures. It is only by capturing increasing detail about an asset’s lifecycle that organizations can begin to provide the corporate visibility required to underpin CSR strategies.

We’ve all heard these generic statements about green strategies – from procurement to recycling, carbon footprint to flexible working – but they won’t suffice in the long term: Organizations will have to prove their commitment through information transparency and auditable policies.

At the heart of such transparency will be consistent, detailed information about the life of every asset – from its country of origin through maintenance schedules to final disposal. An ethical asset register is becoming a critical tool in proving strategic commitment to environmental strategies, argues Marcus Scholes, Vice President of U.S. Operations for Real Asset Management International (RAMI).

Greenwashing?
Ethical statements and a corporate commitment to a green agenda are becoming a standard component of many U.S. businesses. Organizations are increasingly responding to demands from clients for ethically sourced and produced goods and from employees for environmentally aware policies, with clearly defined Corporate Social Responsibility (CSR) strategies that have a firm focus on sustainability and reducing the carbon footprint.

There is also a growing recognition of the bottom line impact of the corporate green movement. Investments in

We’ve all heard these generic statements about green strategies – from procurement to recycling, carbon footprint to flexible working – but they won’t suffice in the long term: Organizations will have to prove their commitment through information transparency and auditable policies.

At the heart of such transparency will be consistent, detailed information about the life of every asset – from its country of origin through maintenance schedules to final disposal. An ethical asset register is becoming a critical tool in proving strategic commitment to environmental strategies, argues Marcus Scholes, Vice President of U.S. Operations for Real Asset Management International (RAMI).

Greenwashing?
Ethical statements and a corporate commitment to a green agenda are becoming a standard component of many U.S. businesses. Organizations are increasingly responding to demands from clients for ethically sourced and produced goods and from employees for environmentally aware policies, with clearly defined Corporate Social Responsibility (CSR) strategies that have a firm focus on sustainability and reducing the carbon footprint.

There is also a growing recognition of the bottom line impact of the corporate green movement. Investments in ‘Ethical Funds’ have grown rapidly across the U.S. and abroad and, as a result, an organization’s FTSE4Good rating has become an important consideration. FTSE4Good is a series of indices created by FTSE, a jointly owned subsidiary of the London Stock Exchange and the Financial Times, and a world-wide expert in the creation and management of equity indexes. The FTSE4Good series provides independent measures of social and environmental performance for the growing number of individuals, analysts and fund managers who are becoming increasingly aware of the potential links between such factors and financial performance.

But what is the basis for these new policies and statements of sustainability and environmental concern? Are these statements based on intangible, provable policies or, as an increasingly cynical consumer base suspects, simply “greenwash?” While CSR strategies may grab a few headlines today, the potential negative impact both financially and for the organization’s reputation could be significant should these statements be proven to be overly optimistic or incorrect.

And while such strategies are currently a corporate choice, there are growing indications that in the not so distant future organizations will have to prove the true implications of environmental policies to government regulatory entities or watchdog groups.

Tax depreciation strategies can also make a big impact on a company’s financials, Scholes noted. Taking advantage of tax treatments designed to help recoup some of the costs of infrastructure is essential to sound financial management, but can be a challenge with ever-chaning tax laws and the need to keep multiple books for state, federal, corporate and other purposes. Add to this the special tax treatments for particular items and organizations and it is nearly impossible to keep appropriate asset registers unless an automated system is used. Without such a system, not only are asset locations, descriptions and values likely to be incorrect, but the company is also likely to be missing out on strategies that could reduce its tax liabilities.

This is especially pertinent right now, according to professor Tecklenburg, since the new economic stimulus package that will be sending $600 checks to individuals also provides businesses with bonus depreciation for capital expenses. Bonus depreciation offers businesses an extra one-year boost in the amount they can deduct on capital expenses. Under this stimulus package, first year depreciation on capital equipment (purchased in 2008) has been increased to 50 percent of the original purchase cost, with a maximim of $250,000 write-off for companies with up to $800,000 on annual revenues. The remaining 50 percent will be depreciated over a business’ normal depreciation schedule. The Economic Stimulus Package of 2008 allows for similar bonus depreciation rules to those put in place following September 11, 2001, and in 2004 and 2005.

Economic forecasts are increasingly pointing toward recession, a prospect not missed by executive management teams and the boards of many private and public entities who are exploring ways to proactively strengthen their financial positions in order to ride out the economic downturn. Among the strategies many of these organizations are taking is a move to more accurate and effective fixed asset management.

According to Don Tecklenburg, a Certified Public Accountant and assistant professor of accounting at Ohio Wesleyan University, proper asset management is a critical element of corporate accounting and responsibility, and the lack of it can put a business at risk.

In order to develop effective regulations, Canadian officials conducted an analysis of the differences between financial markets in the U.S. and Canada.

Three major differences were identified:

1) Unlike the U.S., Canada did not have a national securities commission.

2) Contrary to the U.S., a significant percentage of publicly traded Canadian companies maintains a controlling shareholder.

3) Many publicly traded Canadian companies are significantly smaller than those in the states; therefore, U.S. SOX requirements would impose a considerable financial burden.

Outcome:

The Canadian Securities Administrators (CSA) created multilateral requirements, very similar to Sarbanes-Oxley guidelines, which adhere to Canada’s unique financial market. CSOX rules are as follows:

MI 52-109
Requires company executives, specifically CEOs and CFOs, to approve quarterly and annual financial reports to ensure accuracy and accountability.

MI 52-110
Expands on standards and rules for audit committees.

MI 52-111
Calls for companies to perform detailed internal testing of accounting processes in accordance with external auditor examinations. This particular rule will be phased in over a time period of four years, starting with financial years ending on or after June 30, 2007.

What does this mean to your company?

RFID asset tracking technology theoretically allows you to walk into a room with tagged assets and inventory items and perform a complete physical audit in a matter of seconds. Travelling quickly from one location to the next, an audit of all fixed assets and inventory items – spread across numerous buildings, floors and rooms, is attainable within a very short time period. Yes, the technology used in RFID is certainly more expensive than conventional fixed asset tracking; however, many will argue that with the timesavings involved, ROI analyses favor RFID.

Q: So which is the better option: RFID or barcode scanning?

A: It all depends.

Your industry, company requirements and finances are just a few deciding factors to be considered in the decision making process.

If you have questions or comments on this topic or are simply interested in learning more about RFID vs. traditional barcode scanning, please post a reply.

Disturbingly, the majority of companies believe the asset register is, at worst, 5% inaccurate – and are therefore shocked when the results of a complete physical audit show it’s actually much worse. Discovering the true level of asset inaccuracy during a disaster recovery situation can create significant business problems. Any inconsistency in the asset register or inability to reconcile the asset value in finance with multiple inventory records will raise significant doubt for insurance companies, delaying payment at best. At worst, an organization could lose any chance of insurance payment and even face charges of claiming for items that do not exist.

Fixed asset management is a fundamental business process. It determines corporate value and has a direct impact on profitability. Yet, if forced to provide proof tomorrow, how many multi-national organizations could be confident in the value of their corporate assets?

The issue of poor asset management extends far beyond insurance premiums. What happens when a company has to file an insurance claim? Without an accurate asset register, it’s nearly impossible to estimate the value of what’s been lost in a disaster recovery or theft situation. When the assessor comes across a 20-year-old PC on the fixed asset register, they’ll be quick to scrutinize every other item. What’s the end result? Worst-case scenario, the insurance company will refuse to pay the claim.

The asset register has a tremendous affect on a company’s value. Failure to ensure proper fixed asset management means finance directors and internal auditors are not adhering to corporate due diligence.

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