Your company’s fixed assets include tangible possessions with long life cycles such as buildings, machinery, furniture, equipment and more. These are typically major capital investments that are also constantly depreciating due to regular use. Take complete control of asset lifecycle management and minimize the cost associated with depreciation with frequent asset auditing.
What is asset auditing and why does it matter?
Asset auditing is the process of carrying out an objective verification of your business’ fixed assets. The process can be conducted internally by your own employees or by external trained professionals that follow strict procedures to ensure an accurate assessment of your assets.
Well-maintained and long-lived assets equate to greater revenues for your business. Companies that conduct regular and thorough audits can make greater profits, stay more compliant, and reduce wasteful spending.
Measures for a fixed asset auditing procedure
Start by setting appropriate auditing procedures that are suitable for your fixed assets. Doing so helps you gather an accurate understanding of your assets and enables you to greatly benefit from asset auditing.
Benefits of fixed asset auditing and how can tracking software help?
Frequent internal auditing of your fixed assets that follows proper procedures leads to many benefits for your business. Here are the top five:
1. Enhanced productivity
Auditing your equipment ensures that it is functional and working at maximum capacity. Since fixed assets are used constantly by a business to run its operations, it is easy to lose their efficiency due to wear and tear. Asset auditing is a reliable way to keep a track of your company’s long-lived possessions and their condition. Therefore, assets that require maintenance are never overlooked and scheduled for regular maintenance.
An asset tracking software helps you automate preventive maintenance by scheduling recurring and triage services. Keep a comprehensive log of maintenance schedules and get timely alerts.
2. Accurately calculate depreciation
The depreciation of your assets can depend on how often they are utilised as well as the condition in which they are kept. The former becomes a primary reason for the depreciation of your fixed assets since they are consistently running to support your business. This means that their value would decrease with time. However, it is important to understand that different assets owned by your business will have different rates of depreciation.
Asset auditing plays a crucial role in dealing with depreciation for your businesses. Fixed asset tracking software gives you the ability to automate and easily calculate depreciation rates using the Straight Line method or Declining Balance method. With sound depreciation tracking, you maintain better financial records for better budgeting decisions and error-free tax filing.
3. Improved future planning and budget allocation
Asset auditing reaffirms your company’s financial statements and indicates clear negative or positive trends for asset value. Fixed asset audits conducted by experts can improve future planning, decision-making, and budgeting. This also includes an improved allocation of resources depending on the needs of your business. Audits enable you to formulate and compare any reports necessary for this analysis, leading to smarter future decisions.
Many businesses understand the need for replacement for a crucial asset only once its lifespan has ended. This can create many hindrances for your businesses. With tracking software you can run pull reports on the value of assets and depreciation over time enabling you to make smart decisions about retiring equipment that has lived out its useful life.
4. Enhance compliance and control costs
Your profits depend greatly on optimizing your operational costs by cutting back on unnecessary expenses. Fixed asset auditing ensures a monitoring mechanism that enables you to get maximum utility out of your fixed assets and optimize spending. This is achieved through a comparative analysis of audits conducted at intervals in order to keep fixed asset spending in check. A regular audit is also a good way to reduce equipment damage, theft and loss as your employees are held accountable for the equipment in their possession.
5. Solve the ghost asset problem
Ghost assets are assets that do not exist but are accounted for in your official statements. They can be extremely misleading for your business since they may overestimate your net assets, leading to higher tax rates. Asset auditing provides you with an accurate count of your fixed assets. If an audit is performed with the help of asset tracking software, the results are more accurate since no ghost assets would be counted in the evaluation. Doing so would save your business hefty amounts in taxes.
Fixed asset auditing is essential for businesses seeking to maximise their revenue while cutting down on unnecessary costs. Nevertheless, you should ensure that the audits are conducted by following proper procedures that capture the basic information of your asset, its movement, depreciation and are tagged properly. Procedural audits will result in many benefits that your business will enjoy for many years to come.
EZOfficeInventory is a leading asset tracking software. It allows you to track, maintain, and report on inventory from anywhere, at any time. We offer a free 15-day trial – no credit card required!