Well it looks like I ran this into two parts at least. Maybe more depending on how much I want to get across today. In the first post we discussed the basics of what is a fixed asset and a quick example of the differences between capital and expense. Also we discussed a little about how that can be a budget killer to some facilities.
Today we will discuss more about actual tracking and how to keep up with the assets. The first thing to remember is that you probably will not remember. Basic rules of a job should include good note taking and process defining. The general process will come in handy when you need to show a newbie or you want to prove to another group that you are consistent. I recommend using some kind of asset tracking software. This can be anything from a custom built Microsoft Access application to a full blown standalone asset tracking system. Some good things to keep in mind when choosing the software:
- 1. Be sure to get one that will update with the latest tax rules. It’s always crunch time around year end and you don’t want any more headache. So instead of spending extra time researching any tax rules then realizing you need to start all over with the calculations, just get software that will do the trick for you.
- 2. Space enough for pictures. Pictures are extremely valuable in asset tracking systems. As accountants we generally do not know how to describe machines. I usually described them by what area they were in and how much they cost. Sometimes I would also not who wanted to purchase it. But the best way to record an asset for all to remember is to stick a sturdy tag on it and take a couple of pictures. Be sure your pictures show where the tag is and where the physical asset is located in the facility.
- 3. Automatic depreciation calculation. This is almost a default but should be noted.
- 4. Nice excel downloads. You don’t want to be messing around in some bulky system all the time. Some programs don’t want you to download to excel but instead would prefer that you print reports. This can be time consuming and cumbersome. Be sure that the software can easily export to excel.
- 5. Network ability. The final thing to keep in mind is networking. I personally prefer software on my computer that can link to a network database and update live with other users, but I have heard that 100% online databases are also very effective. Either way, don’t get stuck with software that is only on your computer. Not only is this dangerous in terms of data loss potential but also in terms of cumbersome savings and emailing large files.
So your standard process will generally start with the approval of a capital projects. Depending on your company’s procedure this can vary widely. The basic idea is that you get the documentation needed to explain the purchase. This will usually be a letter written to the approver, quotations, and a financial impact analysis. Other items might also include pictures, presentations to explain, any laws or rules that are impacted.
The letter should be written to the high authority that needs to approve the purchase. This letter should be written by the accountant with the help of the project manager. The other information should all be provided by the project manager. The finance team will need to facilitate the financial analysis as this is much more viable for them. The financial analysis will need to be written in layman’s terms. In fact, all written communication for the project needs to be written so that any functional organization leader can understand exactly why we want to buy this and what the impact will be along with any assumptions made.
It looks like I won’t be able to finish up on this topic today so let’s make one more post about this later.