Fixed Asset Forecasts

Fixed assets forecasts

How to stop wasting hours every month

Forecasting capital expenditure (CapEx) and depreciation may only be an annual task for smaller businesses. For larger companies or those with a high number of fixed assets, forecasts tend to be much more frequent and more complex. Having the right tools for the job can save hours or days of tedious work and knowing what to look for is the key to finding the right tools.

Why forecast?

Capex and depreciation forecasts will have an impact on all three financial statements:

  • Income Statement: Depreciation expense will increase or decrease with the number of fixed assets, their useful life, depreciation method and other factors.
  • Balance Sheet: Long-term fixed assets such as property, plant and equipment are shown as net fixed assets. Changes to CapEx or depreciation will impact the total value of assets shown.
  • Cash Flow Statement: Cash flow from investing will change to accounting for the cash used for CapEx.

Forecasting tools

Fixed assets forecasting tools broadly fall into two categories. Spreadsheets are cheap and easy to set up making them suitable for basic forecasting. Fixed asset management software is designed to handle more complex requirements:

  • When the volume of assets to be tracked make it impractical to keep the asset register on a spreadsheet
  • To support compliance with regulations such as IFRS, SORP, Sarbanes-Oxley, IAS or local GAAP
  • Assets are held across multiple locations, countries or companies
  • Reporting is required in more than one currency
  • Multiple areas of the business need access to the register e.g. IT, Finance and Operations
  • Lease agreements need to be tracked and managed
  • ‘What if’ scenarios need to be accounted for

What to look for

Functionality and cost will vary greatly between different fixed asset accounting software packages. Entry level systems or add-on modules may have some very basic functionality while enterprise asset management systems will cover the whole asset life cycle from purchase to payment comprehensive

As a starting point, you should look for a system that:

  • Includes CapEx and depreciation forecasting as standard
  • Allows forecasts to be based on not just your existing asset base but also budgeted capital spend, either at an individual asset level or simply using bulk spend figures
  • Avoids complicated workarounds. Check that budgeted spend can be added in a similar way to adding normal spend. Forecast periods can be run in a similar way to running normal month ends and your usual reports can be run for forecast periods as well as ‘actual’ periods etc.
  • Has the facility to allow project budgets to be entered e.g. per department or category, with a facility to report on budget versus actual capital spend

Faster, accurate and efficient

Even small to medium businesses often have fixed assets running into millions of pounds. Investing in the right fixed asset management software can significantly reduce costs and improve efficiency:

  • Forecasts completed faster saving hours or even days of staff time
  • Budgets and reporting are much more accurate
  • Potential cost savings running to hundreds of thousands of pounds per year through reduced errors, lower insurance premiums and staff costs

For more information on FMIS Fixed Assets, please contact one of the team directly at sales@fmis.co.uk or on +44 (0) 1227 773003.

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