If you are one of those who hear the term “Fixed Asset Management” on a regular basis but don't know about it. Then, you are at the right place! After reading this guide you will have a clear picture of Fixed Asset Management & tracking.
Without wasting any time let's start with our first question.
What is Fixed Asset?
It is a long-term tangible asset, it can either be a property or equipment that a company owns and works in its operations to produce income. Fixed assets are not assumed to be utilized or transformed into money within a year. Fixed assets usually can be seen in the balance sheet.
What is Fixed Asset Management?
According to Business Dictionary
“Fixed Asset Management is the management of fixed assets which cannot be converted to a fair cash value in a timely manner. Fixed assets are often managed through the use of asset tags, which are tracked through serial numbers or bar codes, for easier organization, and are filed for the purpose of accounting, maintenance, and theft deterrence.”
In a simple term! It is the process of tracking and maintaining the company's physical equipment and assets. They can be managed by asset tagging or barcoding. The main reason for implementing is asset maintenance, asset tracking & preventing from loss.
What are the Examples of Fixed Assets?
Here are a few examples: Office equipment, Buildings, Furniture, Manufacturing equipment, Vehicle, etc. Basically, they get depreciated over their useful life.
What are the major differences between Current Asset and Fixed (Non-current) Asset?
People use the term asset and fixed asset interchangeably but there are few major differences between them. Read below
- Current Asset can be converted into cash in less than a year whereas fixed asset cannot be converted into cash within 1 year.
- Current Asset can easily convertible into cash whereas Fixed Asset is hard to convert into cash.
- Fixed assets are valued at net book value. The valuation of a current asset is at cost or market value whichever is lower.
- Current Asset is short term asset e.g. are Cash, Inventory, etc. Fixed asset are long-term, physical assets such as Property, plant, and equipment, etc.
Why it is important?
Here are the few reasons why Fixed Asset Management is important:
Precise asset management can assist you in optimizing your daily action & operation that involves planning, resources use, and the executing management program.
Extending life cycle -
Every asset requires support service, in case if not given can result in a tremendous expense. The asset management keeps check on all such information and assures that assets are accurately managed, thus prolonging their lifecycle and optimizing your property. It is very effective in monitoring & managing the asset.
Saving Money on Maintenance -
At the operational stage of the life cycle of an asset, a business firm can confront several maintenance issues. Maintenance issues can cut into the benefits of the organization. Then again, under-maintenance can prompt to diminished efficiency. So, maintenance should be done on a regular basis.
Removing Ghost Assets -
These assets will be expelled from books which before were mistakenly recorded, tempering the inventory records. In this way, Fixed Asset Management can be beneficial in monitoring the assets as well as in the asset recovery.
How to manage it?
With Auditing - As a professional activity for effective management of assets, put a label on your every asset. When every asset has a unique identification, it's become an easy and simple task to keep track of them. If you are managing assets with fixed asset management software the bar code technique be more effective.
Plus, it also enhances the audit process via tagging. A big organization has similar assets look-wise such as laptops and computers. It tends to be anything but difficult to commit errors by writing the same records twice and it creates problems in the future at the time of taxation.
With physical verification
With the end goal of ideal administration & management, managers must do physical asset verification activity on a regular basis to guarantee asset existence. Physical confirmation would rectify the outcome with an asset in the records book. With the software, the anomaly can be distinguished, and action can be taken accordingly.
Furthermore, Ghost assets are easily recognized with Physical asset verification. It is one that is lost, stolen, or unusable, yet it is recorded as a functioning asset. Assets that physically exist but not mentioned in books, can also create a problem.
With auditing & physical asset verification, practice will not only rectify your record book. But it also furnishes the exact evaluation of the fixed assets of the whole organization. Also, information such as where the asset is situated and how proficiently they are being utilized.
What is the role of Asset Manager in Fixed Asset Management?
Fixed asset managers can enhance work quality & effectiveness by choosing suitable software solutions for the company. They need to create a general ledger in order to save time & data duplicity. They can effectively track, manage, and report in order to remove the asset from service via depreciation over their useful lives.
It also maximizes tax savings through accurate depreciation. For a perfect software solution, the asset manager needs to pay attention to the application integrates efficiently with other modules.
The big picture
Lots of enterprises have several assets yet they fail to comprehend that these Fixed Assets require conventional & regular management. Fixed Asset Management has a never-ending job. It helps asset administrators & managers in upgrading the organization's asset investment.
Some asset tracking methods mechanize the procedure, for example, a company sends products through a Ship for delivery & keeps track via tagging a radio-frequency identification (RFID) on an asset. Another example is a fixed scanner, it is used on toll plaza. The scanner machine automatically scans a moving vehicle & read its bar code within seconds.
The above guide for asset management and tracking show that all techniques are used for asset tracking, but the difference is how effective they are in their industry. In other words, every industry has a different software requirement for tracking. You need to understand then only you can choose the right tracking software for your organization.