The Top Five Reasons To Have The Fixed Asset Module On Your ERP System

When I was in public practice, I never understood why companies with hundreds of assets (or even thousands of assets) preferred to “try” to track all of the assets on spread sheets rather than in an Asset Management System.  The accountants would spend days and weeks trying to reconcile the spreadsheets to last year’s yearend balance, to the purchases, to the disposals, and to the changeover in staff.  The amortization schedule was truly difficult to balance annually.  I would ask the accountants why they insisted on using spreadsheets.  The answers varied:

· we don’t need to spend the money

· it will be too difficult to change

· fixed assets aren’t that big a deal

· I like the spreadsheets because I have more control, and,

· it doesn’t take that much time.

What I would see was that many times, the inside staff did not know where the outside assets were located.  I saw that assets “disappeared” because things were not up to date.  And, I saw that assets cost companies money, right off the bottom line.  I came up with my top five reasons that all companies should have a Fixed Asset system to track their capital assets.

1.  Save data entry and reconciling time.

If you purchase a fixed asset module that works with your accounting system or ERP system, then as you set up the vendor purchase, you can automatically route the purchase to Fixed Assets.  You don’t forget to do it under the “I’ll do it later” scenario, and the asset is not lost because it is forgotten.

Setting up the asset when you make the purchase means that you have an audit trail that should tie into the purchases column of your asset report, and that balancing happens immediately, or shortly thereafter.

2. Track asset purchases so that at any time, the total purchases for the period is easily identifiable.

One area that businesses get into trouble in is the problem of over purchasing assets without matching purchases to their actual cash flow.  This often happens if asset tracking is haphazard.  The Board/CEO/President/Owner does not have good facts to show what the purchases have been.  Because record keeping is spotty, the reporting then, does not reflect what actually has transpired.  Sometimes, they feel that they have not purchased as much as they have.  Budgeting for fixed assets is a very good practice.  However, if you are not tracking actuals to the budget number, the budget really has no meaning.

Over spending, particularly on assets that are not required immediately, is one of the ways that companies get into cash flow problems.  And, if the company leases the assets, they can still track them on the assets register because there usually is an option for noting operating leases or financial leases.

3.  Booking accurate amortization expenses – not under booking or over booking.

Amortization is the expense for the portion of use of the asset.  Many companies do not book their amortization until the end of the year.  If a company has a large investment in capital assets, and if those assets are used to help produce revenue, then the expenses are understated when the amortization for the period is not matched with the revenue.  I have worked with clients where the amortization and inventory adjustments were used as levelling tools to adjust the expenses and “control” revenue or losses.  Accurate tracking of assets was not encouraged!  Consequently, in those companies, small assets had a habit of disappearing.

4.  Track Assets By Number and By Caretaker

Some companies track their assets by numbers that are haphazardly assigned.  The number may not be written down for a day or two, and it may not be sequential to the number assigned before it.  And, the asset – often the small electronics – may move from person to person without notification to the person in charge of the assets.  This makes doing a physical audit very difficult.  And, if the caretaker leaves, there is little in the way of documentation to prevent the person from taking the asset with them, other than the person’s own values.

The Fixed Asset system makes this process so much easier because it provides sequential tracking numbers – most will even print them – and the caretaker can be quickly and easily recorded.  This system makes doing physical audits a more simple process.  And, if the employee leaves, the Asset Manager can quickly run a list of the assets in their possession to give to HR so that all assets are collected before the person leaves.

5.  Insurance Coverage Is Exact

We all believe that bad luck things will never happen to us.  Bad luck does happen!  I have seen companies lose out on fire or water damage claims because they did not have an accurate list of assets that they used to consistently update their insurance coverage.  Those companies that do have accurate listings are often able to lower their insurance costs because the insurance values per asset item are quite realistic. Insurance companies tend to be more lenient when they work with companies where the records are well kept and accurate.  Assets that have been disposed of are removed from insurance immediately so that the company is not paying extra for goods it does not own.  A good arrangement with the insurance company means that dollars coverage is  matched with assets, and the company manages their dollars responsibly.

If your company is not using a fixed asset register, consider adding one before year end.  Get it set up and working. We recommend Dynamics GP for most business assets. It has all of the tracking characteristics required to provide accurate information for year end audits and for providing to insurance companies. And, I agree, if you have less than twenty assets, your business probably can manage on spread sheets.  If you will keep growing, and have leases, then moving into a fixed asset management system is being fiscally responsible.

Judy, ERP Consultant for Etelligent Solutions

Email me at judy@esicanada.com with your comments.

Read about our Fixed Asset Training at http://www.esicanada.com/wp-content/uploads/2011/03/Fixed-Assets.pdf