Calculating Return on Investment (ROI) for your Fixed Asset Management Software Purchase - Part One
Fixed Asset Management Software - Defined
A fixed asset register is an accounting tool used to store and manage an organization’s list of fixed assets (e.g. computer and office equipment, vehicles, land, buildings, etc.), which typically consists of items held for the purpose of production of goods or performing services, not used for the purpose of sale. Quite simply, a fixed asset register is a detailed list of fixed assets.
Fixed asset management is an accounting process used to track fixed assets for the purpose of financial accounting (depreciation). Many companies also elect to track the whereabouts, quantity, condition and maintenance records relating to fixed assets for tax and insurance purposes.
Key Drivers for Implementing a Fixed Asset Solution
From a purely operational standpoint, having an accurate asset register that shows location, condition and the responsible contact 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. These areas cannot be effectively addressed without a specialized fixed asset management solution.
Organizations that are using cumbersome spreadsheets to manage an ever-growing asset register constantly struggle to address a variety of issues surrounding the accountability and traceability of their asset base. The following are just some of the many areas in which businesses, without a comprehensive fixed asset management system, are failing to address:
Corporate governance requirements
(SOX, CSOX, US Tax, GAAP, SAS 70, IFRS, etc.)
Today, companies of all sizes are subject to increased scrutiny by government agencies and regulatory boards reacting to recent business reports and investor’s requests for higher standards of accountability, transparency and overall corporate behavior. The main goal here is to improve financial management, reporting and corporate governance. With such a high degree of attention focused on your organization, why would you risk the integrity of your financial data by relying solely on spreadsheets? Accurate and effective implementation, management, monitoring and updating can easily be accomplished with a specialist fixed asset management system in place; it’s the only real way to ensure compliance.
Inaccurate depreciation calculations
It is a proven fact that nearly all spreadsheets contain errors, which is to be expected with information entered by hand. Whether it be the background asset data or the formula itself, there’s little doubt that depreciation calculations, when based on a spreadsheet, are likely to be inaccurate. Several people within one accounting department will often access, manage and edit the same spreadsheet, making errors even more likely.
A specialist fixed asset management system will eliminate costly depreciation errors. Depreciation formulas and asset lives can be defaulted for each book based on any defined asset category. Processing depreciation this way is both quick and easy, completed with just a click of a button.
Lack of an audit trail and overall security
A specialist fixed asset management system will track and record every detail of every action ever made by any user, which is unattainable with spreadsheets. Dates, times and explanations are recorded as well, making it very simple to ensure the security and integrity of your asset data. A specialist system will require a valid username and password combination to enter the system and will enable department heads to define security at an individual level to ensure that confidential information can only be viewed by those who need to see it and safely hidden from those who don’t. In other words, limited access can by set by user in order to restrict read only and editing rights.
Inability to link ‘parent/child’ assets or conduct asset splits,
batch disposals, etc.
The ability to link ‘parent/child’ assets is key in order to establish hierarchical relationships and dependencies. A specialist fixed asset management system will display such links pictorially in collapsible branches. A typical example of this might be the association between a PC and software license, where the PC is the ‘parent’ and the license assumes the role of the ‘child’. The option to transfer or dispose of the ‘child’ asset will subsequently follow the transfer or disposal of the ‘parent’ asset, keeping the relationship intact.
For obvious reasons, spreadsheets are unable to accommodate ‘parent/child’ asset relationships in such a way, making it difficult to accurately track and manage these important hierarchical dependencies. The ability to conduct automated asset splits and batch disposals will provide similar benefits.
Access to multi-currency, multi-lingual or multi-book capabilities
If your organization operates in many different countries then multi-currency, multi-lingual and multi-book capabilities are most likely imperative in your fixed asset management procedures. A specialist fixed asset management system will have multi-book capabilities to allow core asset information to be shared across any number of books with different sets of figures, enabling compliance with both local and group depreciation policies. Vital information (such as analysis codes, descriptions, acquisitions and capitalization dates, etc. ) can remain constant across all books while details like asset life, depreciation rules and residual vales can be book dependent. As far as multi-currency capabilities go, a specialist system will allow each accounting book to be independently configured to meet international accounting standards. Within the asset register, each office location should be able to record and report on its own assets in local currency. User-defined exchange rates will allow the parent company to easily view and report on the same values in USD.
Unable to meet historical reporting and forecasting requirements
Composing reports and forecasts can be a complicated and daunting process, especially if attempted in a spreadsheet. The data produced is far too important to chance inaccuracies. A specialist fixed asset management system will incorporate standard and customized reporting and forecasting templates to ensure an intuitive method of extracting and analyzing asset data.
Wasted time on tedious tasks such as data entry
Entering and maintaining asset data becomes an endless task when working within the parameters of a spreadsheet. A specialist system will automate the entire fixed asset management process. From data import capabilities to automated reports and forecasts, a significant amount of valuable time can be shaved off the entire process.
Lack of confidence in data integrity
Total control over your fixed asset management data simply cannot be achieved through the use of a spreadsheet. Whether a user input error or unintentional miscalculation, inaccuracies within your fixed asset register are inevitable. With that said, how can you be 100% confident in the integrity of this vital data? A specialist fixed asset management system will have strict security features in place to effortlessly address the issue.