Did you know that, if calculated correctly, fixed asset depreciation can save you money?
Fixed asset depreciation refers to tracking the value of a fixed asset over the course of its useful life and reporting the value for insurance and tax purposes. Depreciation is the amount deducted each year to account for wear, tear, and general aging of the asset. Correctly calculating and using fixed asset depreciation can prevent your company from overpaying on taxes and insurance premiums.
Capturing the Value of Fixed Assets
Every business has some fixed assets. Some have more than others. A consulting company may have very few, while a construction company or manufacturing company can have many fixed assets. Examples of fixed assets include computers, desks, forklifts, vehicles, and equipment.
To effectively manage your company’s fixed assets, you have to know what you have and record its value accordingly. The first step is to take inventory and track fixed assets just as you would merchandise for sale.
It’s a common sight to find fixed assets tracked in a spreadsheet within a company’s operations department. This type of ad-hoc fixed asset tracking can lead to numerous problems. If the spreadsheet isn’t updated every time new assets are purchased or old ones are retired, it can quickly get out of sync with the actual assets on hand. Additionally, if assets aren’t inventoried on a regular basis, they can be misplaced or forgotten.
Problems of Inaccurate Fixed Asset Tracking
Inaccurate fixed asset tracking can be costly. Insurance premiums are calculated as a percentage of the total value of fixed assets. Miscalculations in the depreciation or value can lead to considerable overcharges. Taxes, too, are based on assets, and overvaluation of fixed assets can result in an average of 12 percent overpayment.
Deductions that you may otherwise be able to take can also be missed without accurate fixed asset tracking. If you overcount assets, you’re paying too much because you’re paying on assets that do not exist or are no longer valuable.
Also consider the time and effort it takes staff to count and value assets manually. Depending on the size of your company and the amount of assets it owns, you may find that it takes one or more people several days to periodically evaluate and track fixed assets. That’s time that could be better spent on more important tasks.
Better Tracking
While it’s common to manage fixed asset tracking in this way, it’s also one that’s prone to mistakes. A large and growing company needs everyone working on productive tasks, and any task like manually counting fixed assets that can be automated should be to save valuable time.
A better way to track fixed assets is to use a barcode scanning system similar to one used for warehouse management, treating assets as a separate category of items from salable merchandise. The best way of all is to use a dedicated software program such as Sage Fixed Assets, which helps you managed fixed assets through every stage of its financial lifecycle.
There are many benefits of using Sage Fixed Assets:
- Managing the entire asset lifecycle easily and conveniently
- Faster preparation of year-end financials, including allocating costs, calculating depreciation, eliminating redundant data entry, and storing digital images of key asset records
- Conduct thorough inventories of fixed assets using your mobile devices
- Manage capital budgeting and construction-in-progress projects more easily
View a demonstration of Sage Fixed Assets now.
Fixed assets represent a huge portion of your company’s value. It pays to manage their depreciation lifecycle to maintain control over their value and ensure you’re not overpaying on taxes and insurance.
Emerald TC
Emerald TC provides software and consulting for manufacturing companies. Contact us or call 678-456-6919 for more information.