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5 Ways Asset Management Technology Helps Business

Despite great strides in asset management technology over the last several years, many businesses continue to cling to their inadequate Excel spreadsheets, pens on paper, and other manual practices when tracking fixed assets. Small businesses with poor accounting methods and operational inefficiencies aren’t long for this world, yet 55% of businesses polled in the Wasp State of Small Business Accounting Report fail to utilize an asset management system that allows for auditing.

Related Article: Shopping For An Effective Asset Management System

A guaranteed side effect of conducting business without management software is a general ledger bogged down by ghost assets. Whenever fixed assets (the machines, equipment and other tangible and intangible means of production that companies use to create their income) go missing or become unusable before the end of their “useful lives,” they become ghost assets. True to their name, ghost assets are not often readily apparent, yet the ramifications of continuing to insure and account for these absent inventories can be devastating to the company’s bottom line.

Ghost assets are created in a myriad of ways, which means that an overhaul of the way you account for what is often your company’s largest and most valuable investment is needed, if you still use a manual system. Plugging up the holes, one leak at a time, is too costly and time-consuming. You may want to consider it a better option to incorporate one all-encompassing solution. Here are five ways asset management software eliminates ghost assets:

1. Tracks the physical location of your assets

All too often, businesses utilize a decentralized approach to check-in and check-out systems for their shared fixed assets (such as laptops, mobile computers and vehicles). Sometimes it’s the honor system, sometimes it’s a sign-out sheet on a clipboard, but rarely do these practices result in assets that are always where they’re supposed to be, when they’re supposed to be there. [Tweet " 83% of businesses, in a recent poll, fail to utilize an asset management system that allows for auditing."] There are two common reasons for missing assets: human error and theft. Both of these factors are all but eliminated with a tracking system (usually based on a barcode or RFID technology) that can tell you who checked out an asset, when they did so (date), where the item was when they checked it out, and when it’s expected to be returned. While forgetfulness and miscommunication can result in missing assets, there were also over 11,000 reports of stolen fixed assets across the U.S. in 2013. When the cost of stolen equipment reaches up to $1 billion annually, it’s important to make sure no one, not even employees, can take fixed assets at will. (Additionally, the costs of ghost assets only adds to the financial burden of a company.)

2. Eliminates paperwork errors

Errors regarding the physical location of your assets is one thing to consider, but paperwork errors can be equally problematic. Even the most exacting of accountants and auditors are bound to make mistakes when forced to use spreadsheets as their main tool for tallying assets. Studies show that 88% of all spreadsheets contain errors. One misplaced decimal point or comma can cause accounting quandaries, not to mention mislabeled, misplaced or forgotten assets on the ledger altogether. Paperwork errors like these not only create ghost assets, but zombie assets, assets which appear in your workplace but have no record on your FAL or accounting forms. With management software, every asset, whether tangible or intangible, whether office equipment or simply a folder of important documents, has a digital record (complete with tracking label, notes concerning maintenance schedules, photos, and any other information you deem necessary) that won’t be misplaced or mishandled. TIP: There’s more to asset management software than buying it, learn about the best practices that can help take your business to the next level.

3. Calculates depreciation accurately

Another way ghost assets sneak onto your ledger is when fixed assets are incorrectly depreciated. Depreciation is the reduction in the recorded cost of an asset, matching the cost to the revenue the asset generates. Depending on what kind of depreciation method you use, the asset will eventually decline until it has reached the end of its useful life, at which point, it’s time to get a new one. If an asset’s depreciation isn’t tracked, or is calculated incorrectly (this can happen if a company decides to switch depreciation methods mid-stream, or get important numbers wrong from the beginning), you’ll wind up paying for it, via insurance or taxes, for longer than you should. A proper asset management system will allow you to input all the necessary information needed for asset depreciation into your system (such as original cost, depreciation method and salvage value) and will send alerts whenever your asset reaches the end of its useful life, or requires routine maintenance needed to keep it running.

4. Allows for mobile and cloud computing

More people are working from their phones and mobile devices than ever before, so much so that over ⅔ of small businesses admit they would be lost without wireless technology. Asset management can be done via mobile devices as well, and using a mobile computer to scan and sync with the centralized asset database, on-the-go, is a massive boon to those who want to save time and eliminate the errors that come with waiting to upload information via a conventional computer. 94% of workers with mobile devices agree that having their mobile makes them more efficient. If you’re auditing fixed assets with pen and paper, your records may be out of date before you even finish writing or typing the items on the paper. Cloud computing allows for instantaneous updates, and for employees and managers to coordinate and collaborate as they go.

5. Ensures continuity

Continuity means two things in this context. It refers to continuity across inventory lists and audits, which is important especially as your business continues to grow. Taking an inventory of your assets takes enough time that even the count of the items can change by the time you’re finished writing. Another huge consideration comes with continuity across personnel. If the people in charge of fixed asset inventory happens to move on to another position or goes on vacation, there will be no drop off of protocol, or confusion when a new employee steps in to pick up the slack. The City of Dallas’ Department of Intergovernmental Services found, after making the upgrade to asset management software, that the continuity of personnel was a critical perk. Dallas noted that with the new tracking, city wide records were continuously kept accurate regardless of the personnel responsible for the oversight. The benefits of not having ghost assets on your ledger are enormous, you’ll pay reduced property taxes, won’t overpay for adequate insurance coverage, free up more capital for future expenditures, and stay on the right side of the law. Rather than hiring lawyers, accounting firms, IT experts, and employees who will never make a mistake or steal (note: this is an impossible task) you can find one holistic solution by upgrading to asset management software. Accurate records, correct accounting methods, and seamless continuity across your company’s books will pay massive dividends in the short term, but more importantly, in the long-term. How would implementing an inventory management system help your business to avoid ghost or zombie assets in the future?