How Best to Elevate Your Fixed Asset Management & Accounting
Long-term, physical, and non-current are just some of the terms found within a business’s balance sheet that describe its repository of fixed assets. But, no matter how they’re identified, fixed assets play a crucial role in the way an organization generates revenue. Therefore, they must be expertly managed with a form of fixed asset management.
The management of assets is a detailed process, from tracking equipment and monitoring performance to calculating depreciation and disposing of machinery in the most effective manner. To ensure efficiency, it’s important that a business chooses the right Fixed Asset Management Software.
What Are Fixed Assets?
Fixed assets are typically larger assets that are used in the daily operations of a business in order to generate revenue through the production of goods and services.
In accounting terms, they appear under current assets on a balance sheet and are not expected to be sold, consumed, or converted into cash within the current financial year. Making them long-term assets that offer at least one year of useful life and depreciate in value thereafter (the exceptions for this being land and property).
Fixed assets usually appear in a physical form and are listed on a company’s balance sheet under Property, Plant, and Equipment (PP&E). Although intangible assets can also be classed in the fixed assets bracket, such as copyrights and patents, fixed assets are more commonly seen as tangible. Examples of the fixed assets typically found in a business environment include:
- Buildings and property
- Machinery and equipment
- Office equipment
- Furniture and fixtures
What Is Fixed Asset Management?
Fixed asset management is the process of tracking and monitoring business-owned physical assets.
Much like other forms of asset management, such as ITAM and software asset management, monitoring assets is essential for any asset-intensive organization relying on the production of goods and services to drive income.
A business can have multiple goals when it comes to managing their assets, including:
- Real-time tracking
- Monitoring equipment across multiple sites and locations
- Improving production efficiency
- Increasing operational output
- Optimizing the useful life of assets
- Reducing maintenance costs and unplanned downtime
The key to successful asset management is through the use of a digitalized, preferably cloud-based, software tool. Also known as Fixed Asset Management Software.
A good asset management solution will provide the tools necessary to effectively manage all fixed assets that are accounted for on a business’s balance sheet. It does so by providing users with various functions and features.
Asset Tagging and Tracking
The use of asset tracking tools and technology in the form of asset tags lays the foundation for being able to track fixed assets in real-time. Typical asset tagging devices include barcode, QR code, RFID, and GPS.
Not only does this allow for real-time location tracking to minimize the costs associated with lost and stolen equipment, but IoT devices can also be used to track asset performance and monitor equipment conditions.
Fixed Asset Registers
A key feature of any asset management system is to provide businesses with visibility of what assets they’re responsible for. This is achieved by creating a fixed asset register.
A fixed asset register provides the capabilities to input all data into one centralized system. That includes asset information such as purchasing costs, maintenance schedules, and last known locations. This data can be accessed by staff and other stakeholders through the use of a cloud-based tool.
Asset Lifecycle Management
The process of using asset tracking tools can start to improve the way businesses view their assets. One of which is being able to build and monitor the lifecycle management of each asset.
Asset lifecycle management is a strategic and analytical approach that can be broken down into four stages; planning, purchasing, operation and maintenance, and disposal of assets.
Through this approach, businesses have the best chance of being able to extend each asset’s useful life. As well as calculating depreciation value, identifying asset roles, ensuring health and safety, and taking a preventive maintenance approach.
Why Managing Fixed Assets Is Important
As well as being some of the most important purchases that a business will make in a financial year, fixed assets are also the most expensive. So, in order to maximize investment value and ensure the best return on investment (ROI), it’s important that each asset is managed effectively.
Fixed assets are the backbone of a business’s operational output. Meaning, without proper management, production can slow and revenue can drop. Other factors that organizations experience without the use of a proper asset management tool include:
- Poor inventory management
- Health and safety violations
- Failure to meet compliance standards
- Assets being lost or stolen
- Production-critical equipment failures leading to unplanned downtime
- High maintenance and repair costs
For businesses that rely heavily on their assets, particularly large organizations and enterprises tracking inventories across multiple sites, a fixed asset management solution is essential. As well as maximizing value for money – according to the ISO 55000 international standard – asset management processes can reward businesses in various ways.
Greater Visibility of Fixed Assets
Through tracking solutions such as tagging and IoT devices, businesses are able to collect various forms of asset data and store it in a centralized fixed asset register. This can help to reduce costs associated with the loss or theft of equipment. As well as identify and eliminate ghost assets that a company may still be paying insurance premiums on.
Having better visibility of assets also helps to improve stock control and inventory management. This is particularly useful for a business that relies on having spare parts available at the right time, such as a manufacturing operation. One company that saves millions of dollars each year through asset tracking is Air Canada, who track all their food carts used in airports around the world.
Maximize an Asset’s Useful Life
A key factor in generating a good return on investment is by extending a fixed asset’s useful life. Although marked down as long-term assets, an asset’s useful life is usually within the first year of purchase. From then on, as wear and tear begin to take hold, an asset will depreciate in value. But that’s where the tools of an asset management system can be effective.
By being able to continuously monitor the performance and condition of machinery, equipment, and infrastructure, businesses can slow the rate of depreciation by deploying maintenance schedules. Particularly through a preventive maintenance strategy that involves regular and routine maintenance of equipment to reduce the likelihood of failure leading to unplanned downtime.
Unplanned downtime can be so damaging that in 2016 alone it single-handedly cost businesses $260,000 per hour.
Finding the Best Fixed Asset Management Software
The success of finding good Asset Management Software depends on four key areas:
Identify Your Requirements
Understanding your business, user level, and technical requirements is key to making sure you choose the best fitting fixed asset management solution. As most businesses look at current workflows and try to replicate them in new software, we recommend spending some quality time in this area. Adopting Fixed Asset Management Software is also an opportunity to re-think your current processes, tasks, and workflows.
Involve an Implementation Team When Choosing Vendors
If possible, adopt a simultaneous communication channel with sales and implementation contacts. Implementation contacts from a vendor community typically have vast experience and suggest beneficial workflows during pre-sales meetings. If the implementers understand what you want, you will either get a system that you want or get a straight answer.
Scanning Software Options
Avoid cutting corners when it comes to scanning the asset management market. You can go to the web, use any of the popular search engines and start your search for the right fixed asset management software. You can look at the search results, get into each vendor’s website and enter your contact details to get whitepapers or demonstrations.
This process is time-consuming and can take anywhere between a few hours and a few days to come up with your own shortlist.
But, we know it’s a painful process to search and compare fixed asset software, so we developed an easier and quicker way with our free asset management software comparison tool. The process is straightforward and you’ll get a comparison of relevant software choices in less than a minute.
Ensure Success With Well-Managed Free Trials
The best way to get a good handle on implementation is to evaluate your chosen Fixed Asset Management Software before you buy it. The key here is to spend time on the details surrounding your processes and how well they can be adapted in the software you are evaluating. Use your own data to try out the software and understand how well it can be adapted.