Bracing a Business for Recession - Part Two
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.
Tax depreciation strategies can also make a big impact on a company’s financials, Scholes noted. Taking advantage of tax treatments designed to help recoup some of the costs of infrastructure is essential to sound financial management, but can be a challenge with ever-chaning tax laws and the need to keep multiple books for state, federal, corporate and other purposes. Add to this the special tax treatments for particular items and organizations and it is nearly impossible to keep appropriate asset registers unless an automated system is used. Without such a system, not only are asset locations, descriptions and values likely to be incorrect, but the company is also likely to be missing out on strategies that could reduce its tax liabilities.
This is especially pertinent right now, according to professor Tecklenburg, since the new economic stimulus package that will be sending $600 checks to individuals also provides businesses with bonus depreciation for capital expenses. Bonus depreciation offers businesses an extra one-year boost in the amount they can deduct on capital expenses. Under this stimulus package, first year depreciation on capital equipment (purchased in 2008) has been increased to 50 percent of the original purchase cost, with a maximim of $250,000 write-off for companies with up to $800,000 on annual revenues. The remaining 50 percent will be depreciated over a business’ normal depreciation schedule. The Economic Stimulus Package of 2008 allows for similar bonus depreciation rules to those put in place following September 11, 2001, and in 2004 and 2005.
This entry was posted on Tuesday, May 13th, 2008 at 9:58 am and is filed under Thought Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
I agree. Asset management has many benefits. Reduced cost on insurance premiums. And reasonable settlements according to “real” book value. Depreciation should be calculated correctly as well. Too many businesses make mistakes in their depreciation numbers.
And off course, proper depreciation has tax benefits as well.