Fixed assets management is an effective process of tracking and maintaining the organization’s physical assets to prevent losses.
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 their performance.
This is sometimes prone to human error as it is manually done. In large organizations, automated solutions are in line and offer a reliable way to oversee fixed assets.
Automated solutions or ERP may have various features like location tracking, work order processing, and audit trails. The following fixed assets management tips will help these organizations to manage their fixed assets effectively:
1) Tagging Physical Assets:
Tagging means labeling the asset by its nature and classification. Tracking fixed assets get 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 an identical asset is installed in the enterprise.
Hence, the organization should tag each of their physical assets by tagging them with physical labels like Serial numbers containing the date of purchase.
Tagging fixed assets are not a one-time task. It is an ongoing control. That means the entity should be making sure that the tags are stick with fixed assets correctly and stay with assets as they should be.
This could probably be fixed by verifying the correctness of fixed assets tagged and replacing them immediately at the time entity performs the physical count of fixed assets. Tagging fixed assets correctly could also help the entity speed up the counting and verifying process correctly and effectively.
2) Safeguarding and accountability of assets
Safeguarding physical assets is important to function in fixed asset management. Safeguarding can be achieved by hiring a responsible person as a custodian. Making sure that no one could use or take the fixed assets out from the office, site, or where they are, too, without proper authorization.
Creating accountability increases the levels of security and helps 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.
3) Asset Life cycle management with audit trail
Life cycle management of assets means monitoring the assets throughout their 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 a nutshell, it means preserving the history of fixed assets. The documentation process creates a robust audit trail that helps to meet compliance norms and detect and correct significant errors and omissions before they impact the organization’s financials.
The preserving of history eases the tracking, debiting depreciation, maintenance, and disposal of fixed assets.
4) 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 the 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 and 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.
5) Establishing Standard Operating Practices (SOPs) and internal controls
SOPs are operating guidelines that act as a benchmark to create consistent actions to manage all the fixed assets effectively in an organization.
Establishing SOPs and internal controls ensure that fixed assets have protocols concerning the acquisition, maintenance, and disposals, leaving little to no space for thefts, errors, and misuse of fixed assets of the organization.
6) Log in Assets Performance
Each time the asset operates at manufacturing capacity, the output generated per particular time shall be recorded and constantly checked to match 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 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.