Why You Need To Audit Assets

Inaccurate asset registers cost you money

Inaccurate asset registers can cost your organisation dearly in higher taxes and insurance premiums as well as slowing down business processes. Maintaining an accurate asset register helps organisations retire end-of-life assets, track ethical disposal, add new assets, halt the purchase of unnecessary assets and manage and track existing assets more efficiently.

The greatest savings are in procurement, ethical disposal, and operations. Enterprises that reconcile assets can identify redundant or rarely used products.  An enterprise can save a huge amount of money by dropping an asset for which it was paying maintenance fees but is no longer used. By retiring unused assets, companies may reduce tax bills for assets by as much as 20–30%.

How to keep asset registers up-to-date

Streamlined audit procedures verify that the assets in your asset register are physically located within your organisation’s facilities, and assist to reduce common frauds. Regularly auditing your assets is the best option to keep your asset register up-to-date. Auditing using mobile phones and tablets not only makes audits up to five times faster and cheaper (than buying expensive scanners) but much more accurate than pen and paper.

Why audit assets?

  • Ensure Compliance
  • Due diligence
  • Reconciliation between systems (physical assets vs. assets purchased)
  • Informed asset planning decisions
  • Reduce insurance and taxes
  • Optimise asset use, forecasting and budgeting
  • Reduce risk (e.g. Workplace Health and Safety)
  • Enable better governance
  • Provide accountability

Value and the bottom line

Most organisations carry a discrepancy of 15 to 20 per cent in their asset registers and this makes poor business sense. But while most organisations perform a comprehensive asset audit for financial purposes, there is value in preserving the sustainability of your assets and protecting your business from internal fraud.

Any accountant will tell you this all-important business intelligence has a direct positive impact on the bottom line. It not only results in immediate write-offs, thereby reducing income taxes, property taxes and insurance premiums, but increases the valuation of the organisation, and secures asset data against the risk of future database degradation through the establishment of efficient asset audit processes.

Auditing a variety of assets
Auditing a variety of assets

A verified, accurate asset register will facilitate better asset accountability while ensuring that an organisation’s good governance and regulatory compliance objectives are met. Asset audits can also discover assets that the organisation is incorrectly managing, either operationally or financially, as well as other assets that weren’t being used but were still being depreciated on the books.

– 70% of organizations have a 30% discrepancy between planned inventory and actual inventory.

– Up to 30% of an IT budget could be saved by effective asset management.

– Organisations that practice ITAM had 15% or lower TCO.

– The greatest savings were in procurement, disposal, and operations.

– Enterprises that reconcile assets can identify redundant or rarely used assets.

– An enterprise saved a huge amount of money by dropping assets for which it was paying maintenance fees but no longer use.

– By retiring unused assets, companies may reduce tax bills for assets by as much as 20–30%.

Definition and implementation of procedures for ITAM

Compliance and how not auditing your assets could be costing you money

Lost Assets

A lost asset is an asset that has been lost, stolen or is no longer used but still appears on the company’s asset register (also referred to as a ghost asset). Nearly every company has a problem with lost assets estimating that on average 10% to 30% of assets are lost assets.

The dangers of lost assets are:

  1. Inaccurate balance sheet, as fixed assets account for the bulk of a company’s investments a lost asset can directly influence the value of an organisation.
  2. Lost productivity, assets required for production or operations that are unusable or missed.
  3. Added expenses, the company will continue to pay various taxes, insurances and even service contracts.
  4. Inaccurate capital expenditures (budgeting, budgets are rendered ineffectual as management is not aware of assets that are unusable or missing.
  5. In asset misappropriation fraud, organisations can be found liable for fraud through negligence.

Unregistered Assets

An unregistered asset is an asset that does not appear in your asset register but is active in the organisation. These assets have entered the organisation through a variety of manners, and are typically seen when an organisation has merged or acquired another business, or through one-off purchases conducted outside the usual procurement channels.

The dangers of unregistered assets are:

  1. Inaccurate balance sheet, an organisation that has an extensive amount of unregistered assets will be sorely undervalued.
  2. Work, Health and Safety (WHS) liability, through no risk assessments against assets, no maintenance/inspections history.
  3. Insurance coverage, if the assets don’t appear on the books they will not be covered under the company’s insurance policy.
  4. Financial implications, not claiming tax or depreciation.
  5. Inaccurate return on asset (ROA) ratio.

Misunderstood Assets

A misunderstood asset is an asset that the organisation is incorrectly managing either operationally or financially. Typical examples of this would be a leased asset on which a maintenance budget is assigned or an asset that is being depreciated against the wrong asset class.

The dangers to the organisation are:

  1. Added expenses, whether it is through depreciation losses, operational costs or insurance levies, incorrect classification of assets places an unnecessary financial burden on the organisation.
  2. This may lead to legal implications, if an organisation disposes of a leased asset assuming that they owned the asset it will lead them to be liable for the replacement.
  3. Unwittingly forced into lease rollover, as assets cannot be identified at the time of lease contract maturity the organisation is forced to extend the lease.

Unutilised Assets

Assets that are not being utilised by the organisation but are still being depreciated.  These assets can have numerous negative financial implications for the business and should be disposed of as soon as possible.

Some of the implications of these assets are:

  1. Added expenses, the company will continue to pay various taxes, insurances and even service contracts.
  2. Loss of potential income through the sale of an asset or immediate tax write-off.
  3. Drag down return on asset (ROA) ratio.

Audit assets using phones and tablets

audit assets with phone
Taking a photo of asset condition whilst auditing via a mobile phone.

Tracking fixed and portable assets and ensuring they are available, in good condition and locatable, is a critical aspect of the modern asset manager. Authorising individuals in your organisation to perform quick and easy audits via mobile apps, or to self-audit assets (in their possession), is a fast and accurate way to keep visibility and control. 

  • Conduct ad-hoc asset audits anytime anywhere
  • Audit assets far more frequently with less project management overheads
  • Discover assets that are registered, but cannot locate – immediate write-off
  • Highlight assets that are redundant, no longer in use or ready for disposal
  • Flag assets that are in a poor or faulty condition and take pictures of the asset’s current condition
  • Increases adoption of asset management culture throughout the organisation
  • Staff can easily download the App and set up the App server for immediate use
  • Minimal user training required and rapid staff adoption

Take the pain out of conducting audits and reconciliation

Take the pain out of conducting audits and reconciliation by automating portions of the process and adhering to a proven methodology. This significantly enhances the accuracy and speed of an audit minimising the impact on your daily operations.

Hardcat will supply you with everything you need to conduct your own asset audit project or use our Services Team for a quick and easy audit to deliver an accurate asset register in the format that you require.

We’re proud to be trusted by over 2,000 organisations in over 121 countries for the integrity and reliability of our asset management software and services.

How can we help you?

Hardcat Solutions
Certainty When It Matters

+61 3 9695 5400

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