STEPS TO ACCURATELY AND
COST EFFECTIVELY TRACK YOUR FIXED ASSETS
The first of a series of 20 key decisions
KEY DECISION 1: Review current Accounting practices for Fixed
Assets
Fixed assets are the assets within a company, or government
entity that are needed for the day to day operations that are
"fixed". Fixed being defined as items tangible and non-tangible
to include Buildings, leases, furniture & fixtures, computer
equipment, software, vehicles, production or manufacturing equipment,
and labor associated with the above assets. Most of the accounting
practices relating to fixed asset management are preformed by
the Accounts Payable division which can include the purchase
order receipt, invoice posting, the payment thereof and finally
the entry into a depreciation
software package to track the value of the assets.
Let's start with the first practice we mentioned ORDERING
the assets. Usually the purchase order will indicate what the
department is ordering, how many, who needs the asset, and where
they want to buy the asset from. The team member ordering the
asset
should be the key contact when the asset arrives and needs disbursement
approval. It is
at this point that tracking the asset should begin, for example
adhering a pre-printed barcode
property tag. Review how the asset is being moved from
this department and decide who can incorporate into the procedure
some sort of asset tracking method such as FAS
Asset Inventory by Best®. If for nothing else, accountability
is an issue. In many cases the asset is not even paid for and
therefore the asset is not valued as of yet on the books. This
brings us to the next function.
When the invoice is received it is presumably posted and scheduled
for payment. At the time of posting the invoice for payment,
it is time to determine if this purchase is a capital expenditure
or expense. Many companies set a limit based on the total of
the invoice rather than what the line items total individually.
The most common capital expenditure limit is $1,500.00.
Anything below that figure is to be expensed if this is the
company policy. In many companies there are exceptions to the
rule. After the invoice is paid the asset is hopefully entered
into a depreciation software
package, using the same accounting rule regarding the capital
expenditure limit. Review this process closely because it causes
serious roadblocks which I will address in future articles.
Determine if the capital expenditure for assets should be increased
or decreased. Then decide if entering the assets in the depreciation
software should have a different practice. Such as: entering
the line items separately to track them more effectively.
During this process, you may determine that your company has
partial or ineffective asset managing practices. This minor
review is a great way to streamline effective changes for enhancing
the fixed asset management process and in turn, provide the
company with accurate depreciation reports.
Check with
us next time for: Key Decision 2: Identify Areas of Concern
for Asset Shrinkage or Theft
By: S.E. Pedone
Managing Asset Consultant
Questions?
Contact us by phone 877-208-1175 or fill out our convenient
online form. We'll get
back to you promptly.
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