According to Gartner’s Top Predictions for IT Organizations and Users, 2008 and Beyond: Going Green and Self-Healing, by 2010, 75% of organizations will use full lifecycle energy and CO2 footprint as mandatory PC hardware buying criteria. As a result, the IT analyst group expects that most technology suppliers will start some level of more detailed lifecycle assessment during 2008. The area of carbon accounting, tracking and product labeling (beyond IT) will explode over the next two years.

In the short term, this process will be complex, oversimplified and crude and it will lack standards, creating a limited impact until at least 2010. However, Gartner believes, regardless of the lack of appropriate standards and common metrics, enterprises will demand the information.

However, to be used effectively, organizations need a clear and coherent method of recording, measuring and reporting on the lifecycle of each asset, particularly on energy consumed during manufacturing and distribution processes, and used for IT equipment.

The Ethical Asset Register
This could prove to be a major stumbling block for organizations. Currently, the majority of companies do not even accurately record the number and location of assets, let along their purchasing and maintenance history. In a recent survey of 300 data center managers, over a quarter of respondents did not know how many servers were under their control and more than 40% found they had servers they did not know they had or had looked for one only to find it had been retired.

And this problem is far from limited to the IT asset register. Physical audits of the asset base typically reveal that less than 40% of the assets on the register are easily identified and an estimated 10% are no longer in existence. The problem is often made worse because of varying asset tracking strategies and consistently poor record keeping.

With each department typically recording asset information differently - often on spreadsheets or even paper files - there are no common asset definitions. There is rarely any integration with maintenance, resulting in highly inaccurate information on the replacement of component parts, and few organizations even bother to record the movement of assets around or between buildings.

With this fragmented approach, organizations have no way of accurately and consistently recording or reporting on the key information required to support CSR strategies - from knowing an asset’s country of origin, to how the product was made, what materials it is made from, maintenance schedules and final, environmentally ethical, disposal.

Accurate records will also ensure that an asset’s life is as long as possible. Companies with a loose grasp on which assets are ready for disposal are far more likely to dispose of assets prematurely which can in turn impact the environment through unnecessary waste and recycling. In addition to this, any changes to the value of an asset throughout its lifecycle should always be reflected financially within the business allowing for correct calculation of depreciation. Failure to do this simply undermines business value.

Without a consistent, corporation-wide approach to recording comprehensive fixed asset information, organizations will not be able to accurately report on their asset performance, whether for fiscal or for environmental concerns such as carbon emissions and recycling figures. It is only by capturing increasing detail about an asset’s lifecycle that organizations can begin to provide the corporate visibility required to underpin CSR strategies.

We’ve all heard these generic statements about green strategies - from procurement to recycling, carbon footprint to flexible working - but they won’t suffice in the long term: Organizations will have to prove their commitment through information transparency and auditable policies.

At the heart of such transparency will be consistent, detailed information about the life of every asset - from its country of origin through maintenance schedules to final disposal. An ethical asset register is becoming a critical tool in proving strategic commitment to environmental strategies, argues Marcus Scholes, Vice President of U.S. Operations for Real Asset Management International (RAMI).

Greenwashing?
Ethical statements and a corporate commitment to a green agenda are becoming a standard component of many U.S. businesses. Organizations are increasingly responding to demands from clients for ethically sourced and produced goods and from employees for environmentally aware policies, with clearly defined Corporate Social Responsibility (CSR) strategies that have a firm focus on sustainability and reducing the carbon footprint.

There is also a growing recognition of the bottom line impact of the corporate green movement. Investments in ‘Ethical Funds’ have grown rapidly across the U.S. and abroad and, as a result, an organization’s FTSE4Good rating has become an important consideration. FTSE4Good is a series of indices created by FTSE, a jointly owned subsidiary of the London Stock Exchange and the Financial Times, and a world-wide expert in the creation and management of equity indexes. The FTSE4Good series provides independent measures of social and environmental performance for the growing number of individuals, analysts and fund managers who are becoming increasingly aware of the potential links between such factors and financial performance. 

But what is the basis for these new policies and statements of sustainability and environmental concern? Are these statements based on intangible, provable policies or, as an increasingly cynical consumer base suspects, simply “greenwash?” While CSR strategies may grab a few headlines today, the potential negative impact both financially and for the organization’s reputation could be significant should these statements be proven to be overly optimistic or incorrect.

And while such strategies are currently a corporate choice, there are growing indications that in the not so distant future organizations will have to prove the true implications of environmental policies to government regulatory entities or watchdog groups.

For more than 90 years, Putnam City Schools (PCS) has been one of the top districts in the state of Oklahoma, providing quality education for students in preschool through high school. The district is comprised of 27 schools: 3 high schools, 5 middle schools, 18 elementary schools and 2 that specialize in alternative education. PCS has nearly 19,000 students and 1,400+ certified personnel district-wide.

Considering the size and population of PCS, its hefty asset base of 11,000+ items should come as no surprise. Each time a new item is acquired, a PCS official barcodes the asset and enters its details into Asset4000i, a web-based fixed asset management system supplied by Real Asset Management International (RAMI). For more than two years now, PCS Inventory/Fixed Asset Clerk, Teresa Long, has been using Asset4000, Asset4000i, Inventory4000 and Track4000 to manage financial details and track the physical location of the items.

Prior to implementing RAMI’s software, PCS relied on an obsolete system with limited reporting capabilities and poor usability. The district’s fixed asset data was outdated and unorganized; Teresa and her colleagues established that the information was too unreliable. The team evaluated three different specialist systems and eventually selected RAMI’s fixed asset accounting and tracking modules. The decision came down to its user-friendliness, superior reporting features and web-based capability. Shortly after implementation, Teresa and her team conducted a district-wide physical audit, covering all 27 schools with five handheld scanners. “It was our first physical audit in over 10 years and Track4000 was still new to us at the time. We still managed to complete the audit in just over a month, which was outstanding,” Teresa explained. PCS now plans to conduct district-wide audits every two years and anticipates the next audit to be much quicker after having done it once already.

“We’re back on track now; we have a complete record of all assets within the district, we know which location they’re at, who is responsible for them and we’re also able to store detailed information such as descriptions, purchase costs and dates, condition codes, etc.,” said Teresa. Each of the 27 schools has one user dedicated to updating the fixed asset register (Asset4000i) via its web-based interface; they add and update asset information and barcode items then upload the details into the system. Teresa currently handles all transfers and disposal events, but hopes to allocated that responsibility to each school’s individual user at some point soon. “Asset4000i users currently have restricted access to the register. They can view, add and update asset information only within their screens/school data. I will eventually train the users to conduct transfer and disposal events, which is simple to do.”

PCS is pleased with the system’s benefits so far. Teresa runs several reports on a regular basis. For example, her supervisor can request an asset list for all schools across the district or for an individual school. The reports are Teresa’s favorite aspect of the system, “I can literally produce these reports in 2-3 minutes, which is unbelievable in comparison to what we were able to do two years ago.” Reports are generated and the results are then exported into an Excel(r) spreadsheet for submission.

“Allocating costs and resources has also become much easier,” Teresa commented, “We are able to efficiently track and minimize spending because we know exactly what we have available. If one of the high schools needs five new PCs for a computer lab and I know that we have 10 stored in the warehouse, we can utilize those instead of spending thousands of dollars on new ones.”

Usability is also a key factor, “The system is very intuitive and simple to use,” said Teresa. It has that familiar Windows(r) look and feel, which was a definite draw when we originally viewed the system.” She does utilize RAMI’s Technical Support team on occasion, “They are excellent and always able to resolve issues in a timely manner. I have been very pleased with the support; they are patient and professional.

Putnam City Schools has achieved immense progress with its fixed asset management and inventory tracking processes and procedures since implementing RAMI’s software over two years ago. Business officials are confident in the data and can rely on it to make key business decisions relating to the reallocation of costs and resources across the school district. “I couldn’t be more pleased with the results, support and overall functionality of the software. Choosing RAMI was certainly a wise decision,” Teresa concluded. 

Such systems also allow for advanced forecasting and budgeting. “Simply rolling over depreciation year-to-year is a blunt instrument and it can give management only a very rough summary of potential data with no allowance for other changes,” said Scholes. But when using an automated asset management system, financial directors can produce much more accurate forecasts that can take into account variables such as asset disposals, planned investments and the effects of specific actions on financials and future tax liabilities.

Another benefit of having an accurate asset register is the ability to quickly determine asset losses for insurance claims in the case of disaster, while also enabling the company to track the location and determine the condition of potentially affected items that need to be re-evaluated or disposed of. “Incorrect or non-specific asset registers can result in painstakingly long hours spent reconstructing and re-auditing asset bases at a time when the business’ resources need to be focused on recovery,” according to Scholes.

Both Tecklenburg and Scholes agree that an organization’s fixed assets are critical to its fiscal health, but unfortunately, these items are frequently managed ineffectively, potentially costing a business hundreds of thousands of dollars a year.

That’s where Scholes sees that a consolidated asset management system can offer multiple methods to decrease near-term expenditures, which can aid a business looking to strengthen itself in the face of a possible recession. “Responsible asset management also provides more accurate financials and forecasting capabilities and gives an organization’s management and shareholders a more realistic overview of the true fiscal health of the enterprise. This, in turn, creates more responsible corporate governance and can increase investor faith.”

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.

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) 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.

Has your organization taken action, in regards to improving fixed asset management procedures, during today’s economic downturn?

BOSTON - April 30, 2008 - CBIZ (NYSE: CBZ), the nation’s leading professional business services consulting firm, and Real Asset Management International (RAMI), which develops software for optimizing fixed asset management, today announced an agreement that will enable CBIZ to enhance the services it provides clients by using and reselling RAMI’s Asset4000.

CBIZ is the largest benefits specialist and one of the largest accounting, valuation and medical practice management companies in the U.S.

“Asset management is a cornerstone of fiscal responsibility, touching on many critical areas,” said Marcus Scholes, Vice President of U.S. Operations for RAMI. “These include physical asset tracking, determining insurance premiums and property taxes, establishing proper valuation during litigation, mergers and acquisitions or when seeking financing, and for developing the most beneficial depreciation strategies.”

CBIZ will use Asset4000 in its Valuation Group, which provides financial advisory, valuation and litigation services. The group’s clients include school districts, municipalities, counties, insurance risk pools, private sector companies, hospitals and healthcare organizations. CBIZ will also offer Asset4000 to clients who have opted to retain asset management functions in-house.

“Asset4000 will provide bottom line savings for CBIZ and our clients because it will help us realize efficiencies by consolidating varying systems that were in use in different CBIZ offices,” says David Bowerman, President of CBIZ Valuation Group. “RAMI offers a single system that requires less training and internal support, enables us to set uniform policies and procedures, and also provides a consistent reporting platform.”

“With many organizations facing budget cuts, allocating the internal resources to maintain their property records accurately is becoming a bigger and bigger challenge,” says Kory Dogs, Managing Director of CBIZ Valuation Group’s Northern office. “Asset4000 will allow CBIZ to offer organizations a cost-effective means of keeping up with these critical processes.”

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About CBIZ
CBIZ, Inc. provides professional business services that help clients better manage finances, employees and technology. As the largest benefits specialist and one of the largest accounting, valuation and medical practice management companies in the United States, CBIZ provides its clients with financial services including accounting and tax, internal audit, merger and acquisition advisory, and valuation services. Employee services offered by CBIZ include group benefits, property and casualty insurance, payroll, HR consulting and wealth management. CBIZ also provides IT, hardware and software solutions, government relations, healthcare consulting and medical practice management.

About Real Asset Management International
With over 3,000 client implementations in more than 70 countries, RAMI’s solutions enable businesses to determine and implement optimal accounting strategies, maintain compliance with federal and state taxation and perform asset budgeting and forecasting. The company’s solutions also cover lessee asset accounting, capital project control, document management, inventory control, asset tracking, help desk support and maintenance management.

For further information regarding CBIZ Valuation Group or RAMI, contact:

Lara Gangloff at (770) 858-4423, lgangloff@cbiz.com or
Isaac O’Bannon at (405) 818-6669, Isaac@wordsmithpr.com

In order to develop effective regulations, Canadian officials conducted an analysis of the differences between financial markets in the U.S. and Canada.

Three major differences were identified:

1) Unlike the U.S., Canada did not have a national securities commission.

2) Contrary to the U.S., a significant percentage of publicly traded Canadian companies maintains a controlling shareholder.

3) Many publicly traded Canadian companies are significantly smaller than those in the states; therefore, U.S. SOX requirements would impose a considerable financial burden.

Outcome:

The Canadian Securities Administrators (CSA) created multilateral requirements, very similar to Sarbanes-Oxley guidelines, which adhere to Canada’s unique financial market. CSOX rules are as follows:

MI 52-109
Requires company executives, specifically CEOs and CFOs, to approve quarterly and annual financial reports to ensure accuracy and accountability.

MI 52-110
Expands on standards and rules for audit committees.

MI 52-111
Calls for companies to perform detailed internal testing of accounting processes in accordance with external auditor examinations. This particular rule will be phased in over a time period of four years, starting with financial years ending on or after June 30, 2007.

 What does this mean to your company?

RFID technology theoretically allows you to walk into a room with tagged assets and inventory items and perform a complete physical audit in a matter of seconds. Travelling quickly from one location to the next, an audit of all fixed assets and inventory items - spread across numerous buildings, floors and rooms, is attainable within a very short time period. Yes, the technology used in RFID is certainly more expensive than conventional fixed asset tracking; however, many will argue that with the timesavings involved, ROI analyses favor RFID.

Q: So which is the better option: RFID or barcode scanning?

A: It all depends.

Your industry, company requirements and finances are just a few deciding factors to be considered in the decision making process.

If you have questions or comments on this topic or are simply interested in learning more about RFID vs. traditional barcode scanning, please post a reply.

 Disturbingly, the majority of companies believe the asset register is, at worst, 5% inaccurate - and are therefore shocked when the results of a complete physical audit show it’s actually much worse. Discovering the true level of asset inaccuracy during a disaster recovery situation can create significant business problems. Any inconsistency in the asset register or inability to reconcile the asset value in finance with multiple inventory records will raise significant doubt for insurance companies, delaying payment at best. At worst, an organization could lose any chance of insurance payment and even face charges of claiming for items that do not exist.

 Fixed asset management is a fundamental business process. It determines corporate value and has a direct impact on profitability. Yet, if forced to provide proof tomorrow, how many multi-national organizations could be confident in the value of their corporate assets?

The issue of poor asset management extends far beyond insurance premiums. What happens when a company has to file an insurance claim? Without an accurate asset register, it’s nearly impossible to estimate the value of what’s been lost in a disaster recovery or theft situation. When the assessor comes across a 20-year-old PC on the fixed asset register, they’ll be quick to scrutinize every other item. What’s the end result? Worst-case scenario, the insurance company will refuse to pay the claim.

The asset register has a tremendous affect on a company’s value. Failure to ensure proper fixed asset management means finance directors and internal auditors are not adhering to corporate due diligence.

For further information surrounding this issue click here.