Economic forecasts are increasingly pointing toward recession, a prospect not missed by executive management teams and the boards of many private and public entities who are exploring ways to proactively strengthen their financial positions in order to ride out the economic downturn. Among the strategies many of these organizations are taking is a move to more accurate and effective fixed asset management.
According to Don Tecklenburg, a Certified Public Accountant and assistant professor of accounting at Ohio Wesleyan University, proper asset management is a critical element of corporate accounting and responsibility, and the lack of it can put a business at risk.
“Fixed assets are often one of the largest line items on a company’s financials, yet they are often too loosely tracked,” he said. “Knowing where your assets are, what condition they are in, and having accurate descriptions of them, is crucial to not only tax depreciation strategies, but also to replacement cycles that, if not followed, can lead to down-time. This is true whether the assets are tech devices like computers and servers, production-focused equipment, vehicles or buildings.
As a former chief financial officer at several private universities, Tecklenburg
knows not only the risks of poor management, but also the inherent challenges of keeping up with potentially thousands of items. “Financial managers often find themselves mired in a combination of spreadsheets and programs, but newer technologies have greatly improved asset management, providing not only proper compliance, but also instant reporting and analysis, automated depreciation calculations and planning tools.”
Marcus Scholes agrees. The vice president of U.S. operations for Real Asset Management International (RAMI; www.realassetmgt.com) also sees that improved asset management can actually help strengthen a business, especially in advance of a potential economic downturn. “Improving asset management provides essential short-term cash flow benefits, as well as positive longer term advantages with regards to workflow processes, security and disaster management preparation,” he said.
“From a purely operational standpoint, having an accurate asset register that shows location, condition and the person responsible can help ensure that assets are available and usable when needed.” But how a business manages its assets also has multiple effects on the entity’s finances, through the very tangible costs of heightened insurance premiums, property taxes and neglected depreciation. Here are several ways that implementing an automated asset management system can help a business be more fiscally responsible and better able to withstand economic turns.
Among the key short-term benefits of improved asset control is a potentially dramatic decrease in insurance premiums and property taxes. After performing thorough asset audits, Scholes said that RAMI’s customers have found that up to 20 percent of assets listed on an organization’s asset register are no longer in existence. Accordingly, their premiums may be considerably higher than they need to be and the company may be paying tens of thousands of dollars in property taxes on items that they no longer have. Poor asset descriptions and identification can also lead to denied insurance claims.
E-mail Article
Printer Friendly
