Companies are required to keep accurate records of their fixed assets. However, it is necessary not only to save such data, but to do so in a form that can be utilized across the business, is updated on a regular basis, and can be customized to meet the needs of different departments.
You might not know where to start tracking your fixed assets if you’ve just decided to do so. Creating a great fixed asset tracking and management system may appear to be a challenging endeavor at first. But it doesn’t have to be this way. Following these fixed asset tracking best practices will have you up and running and saving money in no time.
Best Practices for Fixed Assets Management
1. Identify your fixed assets.
It is critical to understand your fixed assets before you begin tagging. Fixed assets are the permanent structures in your building that are not monetized through sales or trading but nevertheless provide monetary worth to your firm. You can learn more about them here.
As a result, they can be computers, staplers, furniture, and other items that assist in the day-to-day operations of a firm while also generating an indirect profit. If you already have a spreadsheet with a list of your fixed assets, identification will be quicker.
2. Choose your fixed asset tracking software.
It would be best if you chose your fixed asset tracking software from the beginning. There is a lot of creative, innovative, and customizable fixed asset tracking software available, but it all depends on your requirements and budget.
Make sure you research and examine the features that a software program has to offer. If you need something particular, such as integrating fixed asset tracking with facilities management, be sure the program can meet your requirements.
3. Establish standardized policies and procedures
To ensure consistent and correct accounting and administration of fixed assets, policies and processes should be developed, including accounting procedures, acquisitions approval procedure, transfers and evictions, lives of use/depreciation, the configuration of assets, and capitalization of debt costs.
Also, ensure that fixed asset inventories are taken on a regular basis, create an inventory and get rid of any assets that aren’t in use or have fully depreciated, asset aging, and reutilization. Furthermore, the rules and procedures should identify key performance indicators (KPIs) that measure the success of your fixed asset management operations, prioritize the most critical items, and define key metrics that show when these activities are mature.
4. Capitalization threshold
A corporation must clearly define what comprises a fixed asset and what qualifies as an expense item. A non-inventory asset should be classified as an asset if it is used for more than a year. Expensing assets below a stated capitalization threshold, on the other hand, is frequently advantageous.
Such a criterion should be carefully assessed to avoid expending assets that should be capitalized, which would result in a financial statement mistake. Prior to adopting the policy, the company’s external auditors could be consulted.
When an asset is ready for its intended use, it should be depreciated as soon as possible, and it should be assigned to the relevant books and depreciation formula. Furthermore, the asset’s kind typically impacts the procedure and life. Thus the asset must be classified accurately.
It is crucial to keep track of this data and record it in your fixed asset tracking system. The acquisition date, total cost, beginning usage date, depreciation period, and disposal are all essential details to remember.
Fixed assets should be inventoried on a regular basis. This procedure will aid in the identification of missing fixed assets, fixed assets that have not been reported in accounting records, fixed assets that have been relocated, fixed asset obsolescence, and so on.
These reports should be generated on a scheduled or on-demand basis by the fixed asset management (FAM) solution you choose.
Periodically, the fixed asset subledger/detailed entries should be reconciled to the general ledger. The fixed asset program should be compatible with the company’s accounting software. Actual expenses, depreciation, remaining value, and disposals should all be included in reconciliations.
A person who is not involved in the reconciliation process should examine and approve such reconciliations.
8. Fixed asset register
It’s also a good idea to keep track of fixed asset registers. A fixed asset register will be established and updated automatically if you’re utilizing the best fixed asset tracking software. As a result, anytime you build an asset profile in your system and fill it with financial, maintenance, and location data, it will automatically be put to a fixed asset register.
You’ll be able to export your fixed asset registration after that easily.
9. Monitor your fixed assets
The next stage is to monitor your fixed assets after you have set up the fixed asset registry. Using an asset management system with a fully integrated reporting feature is the quickest method to accomplish this. Every tiny modification or update, such as when an asset changes hands or locations, will be tracked and viewable in a report in this manner.
These reports can then be used to ensure that the fixed assets you’re utilizing are both accounted for and cost-effective.
10. Delegate the task
The next stage is to delegate the task after you’ve identified the proper software for you and verified that it’s successful at tracking and managing fixed assets. The amount and type of jobs that your fixed asset tracking initiatives will require will determine who you assign the work to and how many employees will be working on them.
If you have a large number of assets, you’ll want to use numerous employees to speed up the tagging process. At the same time, you’ll want someone familiar with finances to handle financial reports. The best fixed asset tracking software will be able to be shared between your team, making the process faster and easier.
Implementing a systematic fixed asset management procedure will enhance financial reports and statements, expedite purchases, improve replacement equipment planning, and streamline any internal audit processes. The effort and money spent to put the procedure in place will pay off for years to come.