Fixed assets management is an effective process of tracking and maintaining the organization’s physical assets to prevent any kind of loses.
It enables the organization to track equipment, vehicles, machinery, buildings, assess their condition, and keep them in good working order. The process of managing the assets gets complicated along with the size of the organization.
Small organizations use excel spreadsheets or manuals for asset tracking and help them manage fixed assets in terms of their physical controls and as well as their performance.
This is sometime prone to human error as it is manually done. In case of large organizations, automated solutions are in line and offers a reliable way to oversee fixed assets.
Automated solutions or ERP may have various additional features like location tracking, work order processing and audit trails. The following fixed assets management tips will help these organizations to effectively manage their fixed assets:
Tagging Physical Assets:
Tagging means labelling the asset by its nature and classification. Tracking fixed assets gets simplified when they are tagged with unique identifiers such as asset IDs.
Bar codes are also helpful when the assets are tracked with the help of fixed asset management software. When an entity holds multiple assets like computer desktops, it can be easy to make mistakes by creating duplicate assets records and failing to dispose of the correct assets when there is an identical asset installed in the enterprise.
Hence, the organization should tag each of their physical asset by tagging them with physical label like Serial number containing date of purchase.
Tagging fixed assets is not the one time task. It is an ongoing control. That mean entity should making sure that the tages are stick with fixed assets correctly and stay with assets as it should be.
This is probably could be fixed by verifying the correctness of fixed assets tagged and replace them immediately at the time entity performs the physical count of fixed assets. Tagging fixed assets correctly could also help the entity to speed up the counting and verifying process correctly and effectively.
Safeguarding and accountability of assets
Safeguarding physical assets is important function in fixed asset management. Safeguarding can be achieved by hiring responsible person as custodian. Making sure that no one could use or take the fixed assets out from office, site or their they are being too without proper authorization.
Creating accountability increases the levels of security and help reduce the incidences of theft and misuse of cash to purchase and maintain these fixed assets.
The organization should maintain high standards of data integrity and documents custody as proper risk management measures.
Asset Life cycle management with audit trail
Life cycle management of asset means process of monitoring the assets throughout its existence in the business organization. It means making a log of all the activities of fixed assets from the date of acquisition through the date of disposal.
In nutshell, it means preserving the history of fixed assets. The process of documentations creates robust audit trail which helps to meet compliance norms and detect and correct significant errors and omissions before the impact on financials of the organization.
The preserving of history eases the tracking, debiting depreciation, maintenance and disposal of fixed assets.
Physical verification of the assets
This means going old school method to verify each asset physically. This helps to verify the physical existence and condition the assets are maintained.
Asset managers conduct periodical physical asset verification to check existence of fixed assets. Assets that exist physically, can also be tracked and brought into books with retrospective impact.
The best practices of physical asset verification include scanning the physical assets, matching with supporting documents and attach corresponding invoices to asset records.
The independent person from the operation or the direct management of fixed assets to perform fixed assets could help to improve the integrity of fixed assets reporting as well as fixed assets management. For example, the entity might set up an internal audit team to do this or hire an audit firm to do this specific task.
Establishing Standard Operating Practices (SOPs) and internal controls
SOPs are operating guidelines which act as a benchmark to create consistent actions to manage effectively all the fixed assets in an organization.
Establishing SOPs and internal controls ensure that fixed assets have protocols with respect to acquisition, maintenance and disposals leaving little to no space for thefts, errors and misuse of fixed assets of the organization.
Log in Assets Performance
Each time the asset operates at manufacturing capacity, the output generated per particular time shall be recorded and constantly checked if it matches to benchmark performance.
And if the high fluctuation is identified for a certain class of fixed assets, then the review or investigations should be performed to fix the root cause. Maybe because of assets are idle, broken, or stolen.
The other considerations to measure the performance of the assets include the condition of fixed assets and the current year of production of the assets. Log register for performance can be maintained in Excel spreadsheets or through ERP software.