Baby Boomers and Gen Xers will remember the cartoon character Casper. Casper was a ghost. But he was different from other ghouls and spooks. Casper was a friendly ghost and truly wanted people to like him. You may have fond memories of Casper the Friendly Ghost, but if you’re a plant executive or financial officer, you’re no doubt familiar with another ghost that’s definitely not your friend.
We’re talking about ghost assets, those spooky items that haunt your ledgers and frighten your financial statements. When they shout “boo,” the scary thing is how much you’ll end up needlessly paying in property taxes and insurance premiums.
A recent Gartner study has revealed that between 15 to 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 before they are discovered and removed. And during that time, they are preventing an organization from taking advantage of depreciation, draining money from revenues, putting a squeeze on profit margins, and causing costly mistakes in a company’s financial statements. These mistakes can negatively impact stock prices for public companies and also affect how lenders and banks view the company when it asks for credits and loans. And, as corporate financial statements are undergoing greater scrutiny from regulators, inaccurate ones could invite action from federal auditors.
Ghost assets are fixed assets, such as equipment, property, and vehicles that have either outlived their useful lives for the owner or just can no longer be accounted for because they are missing. Sometimes that can mean missing as in they’ve vanished or been stolen. Other times, it’s a simple mistake that can create a ghost asset. Perhaps a generator no longer works and can’t be repaired. It’s now useless and has been hauled off to the scrap yard. Unfortunately, no one tells the corporate accounting department. Accounting believes the generator is still being used and counts it as an asset even though it’s actually long gone.
It may sound implausible to “lose” something as big (and noisy) as a generator, but it happens… and a lot more often than you may think. So much so that Gartner estimates that nearly one third of all companies don’t know what assets they own, where they are and who is using them. But the companies keep paying property taxes and insurance on them. Pretty scary, eh?
If your organization finds itself in such a frightening situation, an innovative fixed asset tracking strategy known as Connected Fixed Assets can provide a ghost-asset-busting solution. A Connected Fixed Asset tool can enable users to accurately track the location, quality, condition and depreciation of a company’s fixed assets across the enterprise. It delivers greater visibility into the asset control, audit and reconciliation processes.
How does it work? Assets are tagged (marked with a scannable barcode, QR code or optical character recognition label). This can be done during warehouse receiving, regular inventories or cycle counts, or whenever a piece of equipment undergoes maintenance. An organization’s asset management team (or any front-line worker, as necessary) then scans fixed asset tracking information using a barcode scanner or other mobile device. Collected fixed asset tracking data is immediately and automatically uploaded into the back-office system of record, such as SAP, saving time and administrative costs. Executives, directors and supervisors can view all information in real time via dashboards that give live analytics that support knowledgeable, fact-based decisions.
Fixed assets can be tracked across sites, locations and geographies. Because front-line workers and data collectors are using a mobile, digital platform, they can communicate and collaborate with each other, enhancing efficiency and effectiveness. They can make use of native mobile device capabilities, such as barcode scanning, capturing current pictures/videos through a camera and GPS to accurately and automatically track the location. They can instantly update the status of the fixed asset with an inventory note to seamlessly complete the workflow between finance and front-line workers. This bridges the communication and collaboration gap between the two interdependent teams and they all become highly productive, while capturing highly accurate information to eliminate ghost assets from their financial statements. Asset inspection tasks and reconciliations can be easily configured and performed with just a few clicks.
Let’s go back to the broken generator mentioned earlier. With a Connected Fixed Asset solution in place, there’s less chance it will turn into a ghost asset, costing its owner money in taxes and insurance premiums. As it’s been tagged with a scannable barcode, a QR code or an optical character recognition label, its location, quality and condition, it’s far less likely to just “vanish” because someone forgot to tell accounting the generator is no longer usable. It can be regularly scanned and its vital information recorded. If the generator ceases to function, that condition can be noted and the company’s financial staff alerted in real time so that it can be removed from the ledger. If, on the other hand, the generator does manage to disappear, easy to configure digital screens can definitely state the asset cannot be found, removing guesswork.
Many companies today are offering Connected Fixed Asset solutions. However, not all include the configurability as described above. If ghost assets and inaccurate financial statements are haunting you, you’ll want to be sure any solution you look at offers customization and easy configuration.
Questions? Innovapptive can show how a Connected Fixed Asset strategy can benefit a company’s asset management program. Watch a short, two-minute introduction video here. Then, click here to schedule a free demo, or call us at 844-464-6668.