A ghost asset is an asset that cannot be physically accounted for yet appears on a business’s stock sheet. Ghost assets appear when either an asset has been lost, stolen, destroyed, or misplaced and has not yet been removed from an asset register.
Ghost assets can be found lurking in all types of businesses. Once formed, they can have a negative impact on spending and productivity. Ghost assets are particularly common when using manual methods such as spreadsheets to manage assets.
One way to reduce the build-up of ghost assets is by using automated tools to help track, monitor, and manage your assets. A digital solution that provides the right capabilities to automate these activities is Asset Management Software.
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 exist or are unusable due to being faulty or having parts missing. It is estimated that 10 to 30 per cent of a business’s fixed assets are no longer owned.
A ghost asset can first appear when parts are taken from working equipment and used to fix other assets. Examples include tools or machinery getting lost due to poor inventory management or outdated computers not being disposed of correctly.
A ghost asset could also be a piece of equipment that has been lost or stolen. Or even a fleet vehicle that is 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 in place.
3 Negative Impacts That Ghost Assets Can Have on a Business
Being unaware of one or two ghost assets might not impact a business’s day-to-day activities. But, as more and more assets go unaccounted for, they can start to have a negative impact. Especially when it comes to financial and legal activities.
There are three key areas of a business that ghost assets can have a significant impact on. These 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 within a company means they would be identified as working assets. Meaning they would typically be included in a business’s insurance coverage.
3. Reducing Workplace Productivity
Ghost assets can also 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 on an asset register, this would impact directly on productivity. The employee would be unable to do their job and delays would incur.
Ghost Assets Vs. Zombie Assets: What’s the Difference?
Without a sophisticated asset management solution, businesses are in danger of incurring cost and performance losses through the appearance of ghost assets. However, they’re not the only issues caused by outdated and manual asset management processes. Asset managers must also be aware of zombie assets.
Zombie assets are fixed assets that exist on-site or in the workplace but are not listed on a company’s register. Simply put, they’re the exact opposite of what ghost assets are.
Similarly, zombie assets can have a dramatic impact on business operations. They can negatively affect tasks such as:
- Tax payments
- Profit projections
- Compliancy of equipment
- Accuracy of asset registers
- Maintenance plans
The Steps Taken to Remove Ghost Assets From a Business
The impact that ghost assets have on business activities is clear. So, removing them can result in several benefits such as:
- 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
The process of removing ghost assets can be quick and easy, especially if you have access to the right tools. This process can be broken down into four steps:
1. Review your current list of assets. The first step is to compile a list of assets from your asset register, stock lists, or spreadsheets.
2. Perform a physical audit. Next, you’ll need to perform a physical audit of all fixed assets you’re accountable for.
3. Identify and remove. By comparing the list of assets on record against your physical audit, you can identify and action ghost assets.
4. Implement an asset management system. To improve the tracking and governance of assets in the future, you’ll need to find and implement an asset management system.
Using Asset Management Software to Scare Away Your 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 Asset Management Software, businesses can make the process of managing assets easier and more accurate.
Most asset management vendors incorporate features that make it easier to identify and eliminate ghost assets, including:
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.
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 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.