A ghost asset is an asset that cannot be physically accounted for yet appears on a business’s stock list. They appear when an asset has either been lost, stolen, destroyed, or misplaced and has not yet been removed from an asset register.
It’s estimated that 10 to 30% of a business’s fixed assets are no longer owned, meaning ghost assets are a common occurrence in the workplace. Typically, they exist when:
- Assets are managed manually with pen and paper or spreadsheets
- An asset is unusable due to faulty or missing parts
- Outdated and unused fixed assets are left to depreciate on-site
- Tools, equipment, and spare parts are lost due to poor inventory management
It’s crucial that asset managers are aware of the impacts of ghost assets. Once formed, they have a negative impact on spending, purchasing, and productivity. In a recent survey, 49% of small business owners didn’t know what ghost assets were, let alone how they were impacting operations.
3 Negative Impacts That Ghost Assets Have on a Business
If ghost assets are prevalent within a business they will have a negative effect on two main factors; costs and operations. Three example scenarios include:
1. Paying Taxes on Assets That Don’t Exist
Ghost assets represent assets that aren’t available in a business’s physical inventory. For example, if you can’t account for 20% of your fixed assets, this would equate to paying 20% more in taxes than needed.
2. Paying Inflated Insurance Premiums
Being unaware of assets that don’t exist means they would be identified as working assets. Meaning they would typically be included in a business’s insurance coverage and premiums.
3. Reducing Productivity
Ghost assets can harm business activities through decreased productivity levels. Having an asset exist only on paper can lead to additional and unplanned expenses. This can be caused by unexpected downtime and supplying extra funds to replace the asset. For example, an employee needs to locate and use a piece of equipment. If that equipment is missing or broken but is listed as available, this would directly impact productivity. The employee would be unable to do their job and delays would incur.
Guard Against Ghost Assets With Asset Management Software
What Type of Assets Are You Looking to Manage?
How to Remove Ghost Assets in 4 Steps
1. Review Your Current List of Assets
The first step is to compile a list of your assets. This can be taken from either an asset register linked to an existing asset management system, stock lists, or spreadsheets. Depending on the details attached, you should see:
- Where an asset is located
- What it is used for
- How much it was purchased for
- The date of purchase
- Last known user
2. Perform a Physical Audit
Next, you’ll need to perform a physical audit of all fixed assets on site. This is also known as a physical stock take, which involves manually tracking and counting all inventory, equipment, tools, machinery, and more. This is a time-consuming process that is typically performed with pen and paper or on an Excel spreadsheet.
3. Identify Ghost Assets
Now, compare your current list of assets and the data collected from your physical audit. If assets are showing in your current list of assets that haven’t been identified when performing a physical audit, you have a ghost asset.
4. Remove Ghost Assets
This can be as simple as deleting a row in a spreadsheet or archiving a file in an asset management system. Be sure to check that the asset file isn’t linked to other files or functions before removing it from the system.
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What Type of Assets Are You Looking to Manage?
How to Future-Proof Against Ghost Assets with Asset Management Software
The removal of ghost assets can have several benefits, including:
- Improving the accuracy of financial statements and reports
- Reducing tax and insurance premiums
- Improving budgeting for capital expenditures
- Generating greater asset ROI
- Increasing employee productivity and efficiency
To avoid carrying out further time-consuming physical audits, it’s important to guard against any ghost assets that may appear in the future. The most effective way to do this is by implementing an asset management system.
Although data will still require manual input at times, an asset management system will help to automate processes such as recording asset purchases and disposals, which help to future-proof against unaccounted assets.
Most Asset Management Software tools will have features to combat ghost assets, such as:
Asset Register & Lifecycle Management
Asset lifecycle management gives a clear picture of all assets and where they are in their operational life. This occurs at the very beginning of an asset’s life with planning, through to disposal. This data is stored in a centralised asset register. Which also includes data such as real-time location, users, unique ID numbers, and stock quantity.
Inventory Management With Real-Time Asset tracking
Inventory management can be performed by continuously tracking assets with technologies such as RFID tags, Barcodes and QR codes, NFC tags, and GPS trackers. This lets you know the real-time location of each asset and provides a detailed overview of stock-level metrics.
Data Analytics and Reports
Generating detailed asset reports ensures a business can carry out auditing and see how its fixed assets are performing. This feature can be crucial in the process of identifying ghost assets that have a strain on finances.
FAQs
What’s the Difference Between Ghost Assets & Zombie Assets?
Zombie assets are fixed assets that exist on-site or in the workplace but that are not listed on a company’s register. Essentially, a zombie asset is the opposite of what a ghost asset is.
What Is Ghost Inventory (Phantom Inventory)?
Phantom inventory is relevant to physical product merchants such as retailers and refers to when recorded inventory levels don’t match the number of inventory actually in stock.