For any company, across all industries, assets like land, buildings, transportation, and manufacturing and computer equipment represent the largest investments made. Establishing the highest standards of depreciation accuracy and best practices in fixed asset accounting management will pay off in savings and efficiency and reduce losses.
Importance of physical inventories
Proper inventory records will ensure that maintenance is performed at regular intervals so that assets function properly through their entire useful life. Physical inventories also make sure that assets aren’t removed, retired, or simply disappear without proper replacement or updates to the balance sheet. If there are fixed assets on the books that are “ghosts”, then a company might be overpaying taxes and insurance on the inflated balances. Facilities and accounting departments should work together to conduct regular inventory counts that are integrated with the company wide fixed asset system.
Ensure accurate depreciation calculations
Sound fixed asset management accounting can yield substantial tax savings in depreciation deductions. This is the highest value provided by quality fixed asset management software. Ensuring compliance with IRS regulations and industry best practices can be very complicated for any accounting manager to maintain manually. Software programs are regularly updated with the latest tax and depreciation rule updates removing that burden. Since depreciation expense is tax deductible for most private, for profit companies, the accuracy of calculations is critical for maximizing tax savings.
Improved long range planning
Accurate and complete fixed asset reports are highly valuable for planning. Facilities can use them as a basis for their maintenance schedules in assigning priority to which building needs repairs and upgrades each year. IT managers can look at the age of system computers to plan a regular replacement schedule for obsolete products. Finance executives rely on the reports to plan for the larger outlays of cash needed for asset replacement and for tax planning.
Safeguarding the biggest investments your company makes is easy when you have a fixed asset accounting system with inventory tracking, built-in depreciation and customizable reports. Contact us today for more information on putting such a system in place.
