Most organizations do not take depreciation tracking seriously as a result their bookkeeping is not accurate. Moreover, it also impacts tax reporting. When you try to maintain a perfect record for depreciation tracking of assets manually, you will not be able to do so because an organization is equipped with a lot of assets and equipment.
For depreciation tracking an organization can use asset tracking software. With this software, you will not only be able to track depreciation but this software also allows you to manage assets effectively.
What Is Asset Tracking Software?
Asset tracking software provides a centralized platform through which crucial information of each asset is retrieved such as status, location, maintenance history, etc. It keeps track of assets in real-time and very helpful in depreciation tracking.
How it is done? With the help of assets tags (barcode labels and Radio-frequency identification tags). A tag contains a unique identification number, once the tag is scanned by scanning devices it can gather all the information about that particular asset.
Asset tracking improves asset utilization. Moreover, it also provides security to assets.
Asset tracking is helpful in physical verification of assets as they provide real-time location of each asset. Moreover, the finance department can verify the existence of assets and in their balance sheet as well. An organization that does not keep track of their assets, they lose a lot of money annually.
What Are the Benefits of Asset Tracking Software?
Depreciation tracking is the least considered benefit of asset tracking software. Fixed assets lose worth value as time passes, even as they keep on generating revenue for an organization.
Without a proper asset tracking system, computing depreciation on your fixed assets may include estimation and, as a result, errors, inaccuracy, and penalty. Tax laws keep changing now and then, makes this work more complex.
While a few organizations redistribute this activity to an expert bookkeeper or accountant, other organization does not have enough resource to outsource it. So, they keep it in-house. In these types of situations, an asset tracking software guarantees precise, consistent & compliance with tax rules and laws.
Eliminating Ghost Assets
Another benefit asset tracking software provides is eliminating ghost assets from the company. They can hurt an organization's pocket badly if not taken care of properly.
According to the Research Gate,
“70% of organizations have a 30% discrepancy between planned inventory and actual inventory. Up to 30% of an IT budget could be saved by effective asset management.”
Ghost assets are those assets which are mentioned in the account books & records but physically not accessible. When they are accounted for in records, you need to pay expenses for those assets which you are not even using or not physically present. But with asset tracking software, you can distinguish and dispose of ghost assets.
Through this tracking software, you can write the exact net value of the asset in your reports. Most organizations only use the purchase value but after time the asset value decreases because it is used regularly & value decreases. Depreciation enables organizations to recover the purchased cost.
For accurate depreciation calculation for each asset, all bills and invoice proof are must be kept to take depreciation benefit. However, we know that papers can be lost therefore all bills shall be maintained in the asset tracking software which also enables you to find required documents within minutes.
In this software you can find two methods for correct asset depreciation calculation:
- Down Value Methods
- Straight-line Method
Well-informed Business Decisions
The most important benefit of tracking depreciation with this software, allowing you to make well-informed business decisions related to finance based on reports and analytics.
Moreover, it allows you to easily identify which assets are taking more maintenance or when an asset's productive life is finished or when it needs to be disposed of. So, you can avoid the risk of asset failure.
Furthermore, precise reports, warranty information, and other crucial data help to enables you to make informative decisions and not based on just estimation and assumption.
Compliance and Audit
Last but not least compliance and audit every businessman knows how exhausting and time-consuming audits can be! In an audit, the software provides real-time location of assets, this feature comes handy while conducting the audit.
Moreover, this software plays a crucial role in the physical verification process of assets. As you can see a complete list of assets. Furthermore, from the audit viewpoint, you can see what is the current condition of each asset and cross-check asset ownership as well.
Compliance organizations make sure that every organization follows the rules as per the industries' rules and standards otherwise organization can be penalized. Asset tracking management software ensures the rules & regulations are followed.
This software alerts you when a purchased software is about to expire because if the organization is using an expired version of software then it will be considered as a rule violation and the organization will have to pay fine.
As we have said above depreciation tracking is the least considered part of an organization. However, still, companies make some mistakes in their depreciation calculation.
An asset tracking software not only helps you in depreciation management but it also eliminates the usage of the spreadsheet which is only partially correct.
Asset tracking software can improve your business in many ways from depreciation tracking to effective asset management, this software does it all. Asset management software has something for everyone.
From asset maintenance to financial asset management and from technicians to managers, anyone can use this software. With software assistance, hindrances in the procedure can be found and productivity can be increased by employees as well as organization.
Frequently Asked Question (FAQs)
1. What is the objective of depreciation recording?
The objective of depreciation recording is to spread the purchase amount of asset over its useful life. It records how asset actual value decreases over time and by that decreased amount some portion of the value is used in tax saving form.
2. What are the advantages of asset tracking software for an organization?
The advantages of asset tracking software for an organization are as follow:
1. Reduced asset downtime
2. Increased asset performance
3. Increased asset life
4. Minimize asset theft
5. Inventory management
6. Purchase and requisition management
7. Eliminate human error
8. Asset security
9. Report and analytics
10. Audit & physical verification
11. Regulatory compliance
12. Cloud-based asset management
13. Asset ghost identification
14. Calibration management
3. What are the main features of Asset tracking software?
Main features of Asset tracking software:
1. Maintenance tracking
2. Work order status tracking
3. Alert & notifications
4. Check-in & check-out
5. Real-time asset tracking
6. Utility monitoring
7. Barcoding/RFID tags
8. Service history tracking
9. Preventive maintenance
10. Maintenance scheduling