Top 5 Ways To Find Money Through Fixed Assets

Wow… today the stock market crashed so big it has probably got us all thinking… where do we go from here? Which also gets me thinking — how can businesses find some cash flow so they have some “rainy day funds” (or for operating expenses) in their back pockets?  Then it dawned on me… if they manage their fixed assets properly and received detailed cost segregation studies or had a proper 3115 study done, then shoot, EVERYONE could have extra cash flow.

If you think about it, there really are many ways to capture extra cash flow through fixed assets.  From very small efforts to large.

Top 5 Ways Fixed Assets Can Capture or Re-capture Cash Flow

  1. Cost Segregation Studies – extra Tax Deductions with properly classified fixed assets.  Money is in the DETAILS, not in bulked entries everyone!  Make sure you capture your 100% bonus depreciation for 2011 – it will go away soon.
  2.  Rev Proc 2007-16 Study – 3115 assets; allows taxpayers to change their method of accounting and claim the allowable depreciation (or amortization) amount they never claimed (i.e. bonus depreciation, etc.).
  3. Physical Fixed Asset Inventories – cost savings all across the board with Property Taxes, Insurance Premiums, Financial savings impact and more.  Have you ever done one of these before?
  4. Asset Appraisals – is it really worth TODAY what it once was?  Probably not.
  5. Automated Depreciation System – if you are still stuck in spreadsheet land for calculations, believe me when I say, YES you ARE missing additional expense and bonus that you are entitled to.  I see it every time I open someones spreadsheet!  Doesn’t matter the size of the organization or spreadsheet, there is ALWAYS calculation error, sometimes in the millions.

Which industries would benefit from these services / studies?  Just about all industries, well, maybe government and non-profit wouldn’t benefit from all five, but certainly from a couple.  Industries that would uncover a ton (always in the thousands – sometimes millions) from one or all five: hospitality, data centers, banks, manufacturing, retail, healthcare to name a few.

Now I know why I love waking up every day to go to work for the past 14 years (and growing)… because everything I (and my associates) do each and everyday help people and their businesses grow.  Who doesn’t like that?  Probably the same people who don’t like furry fuzzy kittens.

 

 

Physical Fixed Asset Inventory / Audit: Quick Start

In the past few months, I’ve received about one or two calls a week with questions pertaining to conducting physical inventories.  Which gets me thinking… Oh yeah, it is about that time a year again.  Internal audits of companies fixed assets! 

About this time every year is often when companies start putting deadlines on themselves for gathering their information.  Many times it is sparked by internal audit controls, SOX testing, reorganizing, or better yet, “the auditors just left and said we need to do a better job controlling our fixed assets“.

After having several conversations with all these different companies; their situations running in a variety of flavors… I get a little worried that perhaps, they are still going to venture off in the wrong path.  The one of destruction not success.

 Things to ponder and prepare yourself for BEFORE running willy nilly amongst your assets:

  1. First thing to ask yourself – Is everyone on board internally with this project?  By everyone I mean, departments other than Accounting?  Remember to think of your compadre who work there too.  Example: IT Department, Facilities, Tax Department versus Finance (crazy, but we run into this miss-communication factor quite often).
  2. Second part – where is your data now and what’s it look like?  Are you pulling your fixed asset data from a spreadsheet, home-grown system, IT’s list/system, Facilities listings?  You need to know what data you have and what it looks like so you can better determine what course of action you will be performing with your inventory.
  3. Third piece of the puzzle – AFTER you review your data and data sources, you need to determine if it’s best for you to perform either a Dynamic Inventory or a Baseline InventoryThis is the BIG decision people!  You make the wrong choice here and you could be wasting a lot of precious time and end up taking f-o-r-e-v-e-r on your project.  Or even worse, you may end up doing it all over again!
  4. Moving forward – Labels / Tags… what kind, how many, what are they going to look like?  Order them and provide yourselves with a couple of weeks turn around.  It’s all about scheduling.
  5. Tag em’ – by now you should have already determined what you are tagging, where your putting the tag and who is tagging.  Also, you should have already decided by now WHAT information you will be gathering.  Seize the day and attack!
  6. The BIG Bear of Inventory – reconciliation time folks!  Keep in mind and be prepared that this CAN and WILL take some work.  Especially if your company is a first timer (meaning – you’ve never performed a physical asset inventory – ever).  However, this is where the fruit of your exhausting labor comes into play.  You get to find out what you have, what you don’t have (ghosts… BOO), where it is and who is responsible for it. 
  7. Last but certainly NOT least – keep up the good work my friend!  Now that you’ve cleaned up your data, keep it clean.  Now is the time to determine when you will be performing the next one to ensure that your data stays accurate.

Whew, I feel better getting that off my chest.  I know what you are thinking and I agree, that does seem like a lot to think about and plan before running like a crazy person through the field of assets.   Knowing about fixed assets is one thing… Trying to find them and clean them up is another! 

P.S. did you know that Paragon Systems offers an array of physical asset inventory services and consulting?  Yeppers… ala carte or full load.  Email me.

Baseline or Dynamic Asset Inventory?

When discussing someones upcoming physical asset inventory with them…  “Angie, we are just going to take our outside fixed asset listing of all our capitalized assets from [insert: CPA firm, outside agency, head department, etc.] and use that to FIND and TAG our assets.  We don’t need to do a Baseline because we already have a list.”

Really?  I don’t like to be frank and when I am, I am very diplomatic.  But honestly… the whole reason people come to me (or my other associates at Paragon Systems) is because they DON’T have a CLEAN list – or one they just adopted one.  The whole point is to gather data, reconcile back to accounting records and GET a clean fixed asset list. Why?  To continue to keep it clean so they know what they have and what they don’t.  There are many benefits to a clean and successful inventory.  Ok, getting off my soap box. . .

May I please share with you the reasons why you SHOULD NOT conduct a Dynamic inventory of your fixed assets if you don’t have a GOOD list — or one that hasn’t been yours?

  • List Integrity – the whole reason that someone takes over (brings in-house) their assets is because their ‘outsourced/other’ list isn’t correct.  Right?  Right.
  • Timing – it’s going to take a LOT of time and man-power to look for every needle in your very large haystack. 
    • Individual timing: instead of taking an average of 3 – 5 minutes tagging and collecting data for one asset, it will take about 30 – 60 minutes.
    • Overall project timing: months and months and months of tagging and data collection.  Will you ever really finish?
  • Reconciliation – it is always easier and more efficient to conduct your reconciliation off-line back at your desk than on the fly in the field.  Once you’ve collected your data during a baseline inventory, you can always perform a comparison against your data in Excel.  This assists you with filling two (2) buckets: matched assets and unmatched assets.  You will be able to determine which assets you will need to investigate on (the not matched) much quicker AFTER collecting your data (via Baseline). 

Dynamic – GREAT option for those of you with a fixed asset list.  Upload your data into an automated hand-held bar code scanner (preferred method) and start your inventory.  Update any / all descriptive fields of information while you are in the field.  End result – validating your data in the field.

Baseline – You have no accurate list (or a list at all) or a highly imperfect one and you start tagging your assets to capture all the data about the asset.  Although it might seem obvious, make sure that you pre-define what information you will be collecting on your assets before you go willy nilly.  End result – building your list.

Bringing my point home.  Why spend days, months or even years hunting for a needle that may not even exist at the end of the day?  If you have a list you DON’T trust (or one at all), go Baseline!  Who wants to start over?

More information on the differences between a Baseline and a Dynamic phyiscal inventory.

Love Your Assets – Tag Em’

Do you truly love your fixed assets?  How about giving them a Valentine today and get serious about conducting a physical inventory!  Sounds romantic doesn’t it.

Ask yourself this question, has your business or organization ever conducted a fixed asset inventory audit?  Is your answer no?  This is all too common.  What everyone doesn’t understand is that knowing what you have and what you don’t have is a really big deal and greatly impacts your budget amongst other benefits.

Not only does conducting an inventory audit ensure your accuracy of asset information on your books, it also sets a best practice of managing your assets.   Before you even think about starting your inventory, you need to make sure you have everything planned out and ready to be executed BEFORE you (or anyone off the accounting street) hit the floors with a clip board and some inventory tags.  This will turn out to be a disaster!  A few things to think about prior to auditing:

  1. Company-wide Participation — Make sure everyone and all departments are on board with this project.  If not, this project will fail before it even gets started.
  2. Asset Tagging — What are you going to tag?  Where will you place the tag? How many tags will you need, will they be customized?  What about the starting sequence?  The best one… what TYPE of tag are we going to implement?
  3. Data Collection — What information will be obtained when we are out there?  Where in the heck will all this information go both in the field and out of the field?
  4. Reconciliation — Now that you’ve collected your asset data, make sure you match to your original records and CLEAN THEM UP.
  5. On-going Management — Now what’s your plan for the future?  Don’t take all that time to clean just so you can get dirty again.

Now that you have shown some love to your fixed assets — nothing says you really care like an automated full circle fixed asset management solution!  No, spreadsheets don’t count here – nor do clipboards.  What should you choose?  Hahahaaaa… well, Sage FAS Track Pack with industry leading bar code readers of course!  Email me a valentines asking how you can get started showing the love.

From my assets to yours, Happy Valentine’s Day!

Nice Assets – Wait, What Are Fixed Assets?

I would like to start this article off with a little story.  First of all, I fly a lot to go and do what it is I do – I mean everywhere (love United frequent flier status – you are welcome for the plug) often chatting it up with my flight compadre next to me.  Nine times out of ten we exchange our titles and ask each other what we do for a living.  My conversation often goes like this:

Me: “I sure hope we take off on-time”

Compadre: “Me to, I’m on my way [insert home or work]”

Me: “What do you do?”

Compadre: “Oh I’m a [insert anything but a Fixed Asset Consultant].  How about you?”

Me: “I’m a Fixed Asset Consultant.”

Compadre – with a smirk: “fixed assets hu?  Hahahhaaaaa!”
(depending on the personality of this person I either carry on the funny nuances of the words fixed assets or I move on)

Me: “Yes, I play on those words as much as I can. You’re funny.”

Compadre: “All joking aside, really, what is a fixed asset?”

Which leads me to discover that after 13 years of implementing fixed asset management solutions and writing workflow procedures for over 300+ companies (of all sizes), people still don’t know what a fixed asset really is or why they should care.  Sometimes, even those who take care of fixed assets.

So, what is a fixed asset? A fixed asset is really just a tangible asset like: land, buildings, office equipment, computer equipment, furniture & fixtures, vehicles and machinery / manufacturing equipment.  Every company or organization has them.  Then, they depreciate and based on what type of asset it is (personal or real), they depreciate on different schedules and methods.  Tax has different rules and regulations than GAAP.  If you are non-profit or government, tax is taken out of the equation.

Why are they important you ask? Don’t get me started.  Fixed assets help your business grow or assist in creating your product or service.  Mis-managing fixed assets brings a whole slue of problems like overpaying on insurance premiums or even worse… TAXES, you often end up with a higher total cost of ownership, RISK of non-compliance, missing out on income tax deductions and more (internal theft also comes to mind).

In a nutshell, if you don’t know what a fixed asset is and you don’t manage them properly you could be missing out on deductions for your business to keep growing!  These days, no one wants to go out of business or lay anyone off.  Pay attention to what you have – you could be doing your business a disservice!

I’m off to purchase another ticket to my next United destination to dedicate myself to more fixed assets!  Later.

Anyone Missing Fixed Assets?

Recently myself and another senior fixed asset consultant went on site for a discovery meeting at a prospects who are having issues with controlling their fixed assets.  Some were tagged, some were not.  Those that are/were tagged had different types/formats of tag’s, etc.  They have about six (6) locations throughout the United States and have their fixed asset data in about 8 different Sage FAS companies — each one set up a little different.

Their computer equipment assets that were getting ready to be disposed of.  However, some had tags, some didn’t… not all were recorded to accounting — and if/when they were… they didn’t always have a unique asset id number to use. 

After about a two (2) hour discussion about their upcoming project and what the best approach would be, my associate and I walked out the front door… and a TON of their fixed assets were too!  Guess what, they didn’t know.

Best practices of conducting your own physical asset inventory – free webinar.

Economic Benefits of a Fixed Asset Management System

Most companies look at the initial costs associated with a fixed asset inventory service and a fixed asset management software solution, but fail to realize the bottom line benefits of a successful implementation.  The focus should not be on the cost of the solution, but on the cash flow benefits of not paying unnecessary taxes and insurance premiums.  This actual return on the investment in the project often gets overlooked.

Top Economic Benefits

  • The solution typically pays for itself.  A complete implementation typically uncovers at least 15-30% unrecorded retirements in an organization.  Correcting this discrepancy results in an immediate write off, reducing income taxes, property taxes, and insurance premiums.
  • Audit support.  Records are now more accurate, tied directly to a tagged physical asset inventory, updated annually, and facilitate auditing tests.  Compliance with provisions of the Sarbanes-Oxley standards are also enhanced.
  • Decrease carrying costs.  More efficiently gather and maintain accurate information on fixed assets.
  • Reduce property taxes.  Only pay taxes on assets that are at the location.  This is especially important when a firm has multiple facilities located in different tax jurisdictions with different tax rates and exemptions.
  • Avoid unnecessary purchases.  Increased control over spending money on additional equipment by reassigning and utilizing idle equipment instead of purchasing new.
  • Leased equipment tracking.  Avoid lease termination penalties by simplifying the process of tracking, locating and returning equipment when the lease term expires.
  • Accurate insurance premiums.  Eliminate the concern that the firm is over or underinsured.  Match your insurance coverage and premiums with the actual assets.

We realize that we bring this topic up a lot… but some people still need convincing.  So we believe it’s our job to keep hitting it home.

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