Ghost assets can be found lurking in all types of businesses, from micro to large. Once formed, these assets can go on to cause a multitude of cost and productivity issues within a company. Particularly common when using manual asset management methods such as spreadsheets, ghost assets can go unnoticed for a long time.
What Are Ghost Assets?
Ghost Assets are assets that are listed in a business’s asset register but are not physically accounted for in the workplace. Commonly, ghost assets either don’t physically exist or are unusable due to being broken or having parts missing.
A ghost asset can first appear when certain parts are taken from working equipment and used to fix other assets. Examples include tools or machinery getting lost due to poor inventory management and outdated computers not being disposed of correctly.
A ghost asset could be a piece of equipment that was lost or stolen, or even a fleet vehicle sitting unused and depreciating on-site.
Any fixed asset that ends up being upgraded or donated elsewhere can also become a ghost asset if robust asset tracking measures aren’t put in place.
How Ghost Assets Can Negatively Affect a Business
A business that is unaware of its ghost assets can eventually find them having an effect on both finances and productivity.
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 a company can’t account for 20% of fixed assets, this would equate to them paying 20% more in taxes than they actually need to.
So, by eliminating ghost assets, the reduction of a company’s tax bill could be substantial.
Inflated Insurance Premiums
Being completely unaware of assets that don’t exist within a company means that they would be identified as working assets, thus being included in a business’s insurance coverage.
Again, as an example, if these assets equate to 20% of a business’s asset register then they could be paying 20% more on insurance premiums that they actually need to.
Reduced Workplace Productivity
As well as overpaying on insurance, income tax, and property tax, ghost assets can also harm a business through decreased productivity.
Let’s say that an employee needs to locate and use a piece of equipment urgently. If that asset is missing or broken but is listed as available on an asset register, this would impact directly on productivity. The employee would be unable to do their job properly until they find a solution.
Having an asset exist only on white paper can also lead to additional and unplanned expenses. This can be caused by unexpected downtime and supplying extra funds to replace the asset.
Using Asset Management Software to Scare Away Ghost Assets
Ghost assets commonly appear when a company employs a manual asset management system. This can then lead to increased errors, which directly impact business operations.
But, by implementing effective Asset Management Software, a business can make the process of managing assets easier and more accurate. This means that ghost assets are less likely to occur.
Most modern asset management vendors incorporate helpful features that make it easier to identify and eliminate ghost assets, including:
Asset Lifecycle Monitoring
Asset lifecycle management gives a clear picture of all business assets and where they are in their useful life. This occurs right at the very beginning of an asset’s life with the planning, through to its eventual disposal.
Effective inventory management can be performed by continuously tracking assets with technologies such as barcode tracking and GPS tracking. This allows a business to know the real-time location of each asset and provide a detailed overview of stock level metrics.
Preventative maintenance can be planned and scheduled for all assets to help avoid deterioration and depreciation. In general, preventative maintenance can usually be more cost-efficient than reactive maintenance.
Data Analytics and Reports
Generating detailed reports ensures a business can carry out effective auditing and see how their fixed assets are performing. This feature can be crucial in the process of identifying ghost assets that are having a strain on finances.