Best Practices in Fixed Asset Management

Understanding Fixed Asset Management

Fixed asset management is critical to company financial reporting and planning, and for many, it is also key to optimising asset utilisation. This article outlines best practices and helpful tips for saving you time, reducing costs and improving accuracy when managing fixed assets.

Managing fixed assets requires more than updating your asset register at the period end as an administrative box-ticking exercise. It is essential for accountants, facilities managers, and asset managers. It will help track asset life cycles, reduce costs, and maintain safety and compliance if done effectively. With solutions like FMIS Fixed Assets, managing the intricacies of fixed assets becomes streamlined, ensuring businesses can get the most out of their investments.

Let’s clarify what we mean by Fixed Asset Management, as it is often used interchangeably with similar asset management terms. Fixed Asset Management involves comprehensively tracking and maintaining all company fixed assets and investments. It is distinct from:

• Asset Tracking, which focuses solely on the whereabouts of these assets
• Fixed Asset Accounting, which deals with the financial aspect
• IT Asset Management, which specifically deals with IT assets, usually from a technical perspective
• Enterprise Asset Management, which covers digital and operational assets
• Facilities Management, which is concerned with the use and maintenance of business facilities
• CMMS (Computerized Maintenance Management System), is software for maintaining a computer database of information about an organization’s maintenance operations

1. Plan Ahead

Efficient fixed asset management relies heavily on effective planning. Implementing a successful fixed asset management solution will require planning to deliver a process that meets the needs of the whole business. One of the most common reasons asset management projects fail is through a lack of adoption across the entire organisation, and this will usually happen when the chosen system is not suitable for one or more users within the business. It will not always be possible to deliver a single solution to meet all needs, but it is important to plan how chosen solutions will fit into the overall approach to managing fixed assets.

A strategy encompassing all business areas ensures that assets are managed efficiently from the get-go, preventing the pitfalls of siloed decision-making. A comprehensive fixed asset management plan can create a harmonious balance between various business functions, improving operational efficiency and financial gains.

2. Start with an Audit

Starting with an accurate asset register is essential to effectively managing your fixed assets. The starting point of implementing any new system will be to import or build your asset register. If you are starting from scratch, then it might make sense to implement your system first and complete the audit using the tools provided. A good asset management system will have features to simplify completing an audit, such as making bulk changes and tagging your assets for easy identification later on.

Surprisingly, many businesses operate with inaccurate registers, leading to ghost assets and financial discrepancies. Ghost assets skew fixed asset reporting and can significantly impact asset deployment. An asset cannot be effectively utilised if it doesn’t exist or cannot be found.

An audit can seem daunting if you have many assets but few resources. In this case, outsourcing your initial audit to one of the many providers specialising in stock takes and asset inventories may be worth outsourcing. Pricing is usually based on the number of assets, locations, and details to be recorded.

It is worth checking the accreditations of providers as they will vary across different industries and countries. Key UK accreditations for stock check or asset inventory providers may include ISO 9001:2015, ISO 55001:2014, RICS, CIPFA, NPORS, IAM Membership, SAFE Contractor, and Constructionline, ensuring quality, safety, and professional standards.

3. Effective Fixed Asset Tracking

Fixed asset tracking is more than just knowing what you have; it’s about understanding asset performance and value over time. Distinct from, yet vital to, fixed asset management, effective tracking ensures real-time data accuracy, feeding into financial assessments and operational readiness. The essentials of a formal fixed asset tracking system, including schedules, documentation, and technology use, all contribute to a more financially sound asset management approach.

One key challenge asset managers will face when tracking fixed assets is the tendency for the business to maintain multiple asset registers. This will lead to inconsistency in how different departments track assets, but perhaps more importantly, it will lead to fragmented data and data duplication. The lack of an authoritative data source will make it difficult or impossible to complete an accurate fixed asset reconciliation.

4. Take Advantage of Technology

While fixed assets management and accounting fundamentals may have remained fairly constant, the technology available to fixed assets managers has developed rapidly in recent years. Most fixed asset management software supports a range of features that make efficient fixed asset accounting and tracking achievable for any business.