A fixed asset mentioned in the general ledger deemed useless or physically missing due to theft or destruction and can’t be recorded is known as a ghost asset. For any asset-intensive organization, ghost assets pose the biggest compliance and audit challenges. Tracking and properly reporting every asset are Herculean tasks involving time, money, and labor.
Surprisingly, 12-25 percent of assets recorded in a fixed asset ledger don’t exist. These assets show up on paper but physically can’t be found anywhere else. A recent Gartner study has revealed that 15-30 percent of the average company assets now on the books are really ghost assets. Worse, this isn’t a problem felt for a single year; ghost assets typically remain on a company’s ledger for years, even decades, before they’re discovered and removed. Once created, they may have a detrimental effect on income and output. They’re more prevalent when assets are managed manually with spreadsheets or similar approaches.
Implications of Ghost Assets on Business
Ghost assets are either lost or retired but are still registered as active in your fixed-asset register. They arise from:
- Unrecorded transactions.
- Use of existing machine components to fix broken units.
- A scrapped facility, the assets of which have been assumed to be no longer usable
Ghost assets can significantly impact businesses in four ways: They can lead to filing tax returns for non-existent assets, conformity concerns, payment of insurance premiums, and excess maintenance fees.
They result in misleading financial statements, making it tougher to predict capital expenditures and plan budgets. Unless they’re removed from the books, ghost assets will still count on a company’s balance sheet.
Ghost assets in a company’s fixed-asset register lead companies to:
- Overpay taxes
- Face higher insurance premiums
- Incur additional maintenance fees
- Suffer erroneous fixed-asset reporting, impacting regulatory compliance
- Inaccurately forecast capital expenditures
Timely identification and removal of ghost assets lead to greater veracity of financial records, lowered costs, enhanced capital expenditure budgeting, increased employee productivity, and increased ROI.
End-to-End Fixed Asset Tracking Solutions
To efficiently detect and remove ghost assets, a company must track its fixed assets regularly. With software solutions in place, the depreciation of the fixed asset can be automatically recorded and removed from the general ledger at the end of their useful lives.
Assets may be continuously tracked through inventory management using technologies like RFID tags, barcodes, QR codes, NFC tags, and GPS trackers. They give a comprehensive, regular, real-time view of inventory stock metrics and the current position of each asset through accurate audits. Even if the business has multiple similar assets, asset tagging will ensure that each asset is uniquely identifiable. Budgeting can also benefit from asset tracking by forgoing maintenance on equipment that was no longer in use.
Automated Asset Management Solution to Eliminate Ghost Assets
Purging ghost assets off your ledger doesn’t have to be a scary task. You need to understand where your assets are, what's happening with them, and who is managing them. This requires coordination, collaboration, and communication between multiple areas within your organization. Changes made in one department should be accurately reflected in the others and reported in real-time to ensure data consistency and reliability.
You should physically track each asset and have the data entered in the asset master regularly. Aside from tracking, you also need to know which assets are in usable condition and which need repair. However, physically tracking each asset and manually entering data is a tall task when you have thousands of assets spread across several locations. Moreover, you need to pool enormous resources, including skilled labor to execute such a program, which can adversely affect your finances.
An automated asset management system will help you save resources, generate accurate financial statements, and ensure the highest asset compliance standards. There are a variety of end-to-end fixed asset tracking solutions available in the market for eliminating ghost assets. As a result, it makes sense to account for the overall productivity-enhancing possibilities of these solutions beyond asset tracking to reap maximum benefits while eliminating ghost assets.
Innovapptive’s mobile asset management solution - mAssetTag - offers the perfect choice for an asset-intensive enterprise. It automates and streamlines fixed-asset physical inventory and reconciliation. mAssetTag enables asset managers to conduct multiple inventories and reconciliations across various sites using configurable, SAP® certified mobile devices.
Drive Away The Ghost In Your Asset With mAssetTag
Innovapptive’s mAssetTag provides an easy-to-use platform that accelerates and simplifies accurate accounting throughout the asset management lifecycle. Leveraging native mobile device features such as GPS, camera, and barcode readers, mAssetTag automates the collection of fixed asset data.
The solution enhances asset tracking accuracy while minimizing auditing time. The solution employs barcode, RFID, and NFC technology. mAssetTag leverages these technologies to simplify data entry related to inventory and reconciliation. It leverages native mobile device features, such as GPS, camera, and barcode readers to automate data gathering and reporting. Replacing error-prone paper-based processes with a more accurate and reliable mobile platform helps you quickly and easily capture, tag, scan, and update records.
To learn more about mAssetTag and how it automates fixed asset physical inventory and reconciliation, watch this video or schedule a free demo today.
