While many companies put a lot of focus on saving money on the initial purchase of fixed assets, there are a lot of ways to save money on fixed assets after they’ve already been acquired.
During the lifecycle of the assets, there are plenty of steps that can be taken to ensure that you’re finding every opportunity to save money. It all comes down to having a proper asset management system in place so that you can accurately track your company’s fixed assets. It doesn’t matter if your company is smaller or if you have hundreds, or thousands, of assets. As long as you have an effective asset management system in place you can more easily track, dispose of, retire and transfer assets so that your company isn’t spending more than necessary on fixed asset related costs.
Why is it important to have an asset management system?
Most fixed assets, like equipment or tools, have a lifecycle of somewhere between 3-10 years, but is your company doing a good job keeping track of fixed assets during this lifecycle?
If you don’t have all of the right information, then you’re missing out on important data that can present opportunities to cut company costs in relation to fixed assets. It’s impossible to identify all of the ways you can save money on fixed assets if there is a lack of recorded information about the lifecycles of your fixed assets.
The number one key to save money on fixed assets is to make sure that you’re properly tracking your assets and logging all of the relevant information to help you identify cost-saving opportunities.
How to Save Money on Fixed ASsets
Most businesses are continually searching for ways to reduce costs and one great way to do that is to save money on fixed assets. While at first it may seem like simply tracking assets better wouldn’t necessarily save any money, below you’ll find information on several ways that your company can cut fixed asset-related costs so that money can be moved where it can be used more effectively.
Eliminate Ghost Assets
The term “ghost asset” refers to a recorded fixed asset that is visible on the books, but cannot be physically located or no longer exists. It’s not uncommon for even relatively small companies to acquire equipment, furniture or other fixed assets and, over the course of years, lose track of a percentage of the assets. This can be for various reasons including, but not limited to, employee theft, misplacement, disposal of damaged items or an asset that is no longer in use being stored somewhere unknown.
By having better asset management systems in place your company can work to reduce the number of ghost assets, which are costing you money in several ways. For example, if you consider that some ghost assets could still be in usable condition if they were able to be found, this could reduce the amount spent on buying new fixed assets to replace those that have gone missing.
Additionally, ghost assets are costing your company money when it comes to insurance, taxes, and other related accounting expenses because they still exist in your records, but aren’t being utilized.
Knowing When to Retire an Asset
When fixed assets are registered with your company and properly tracked along with all of the applicable information, you can properly track the lifecycle of your fixed assets. How does this save money? Monitoring and accounting for fixed assets throughout their lifecycle ensures that it’s used productively for as long as possible.
In addition, by retiring unused assets in a timely manner, companies can potentially reduce tax bills for assets by as much as 20% to 30%. Assets that are no longer in service, but haven’t been retired yet, may account for overpaying taxes and insurance costs that are associated with having those assets on the books.
Planning for New Assets
When it’s time to invest in new fixed assets, a lot of businesses will do plenty of external research to make sure they’re spending wisely. However, it’s important to remember that the information collected when tracking the lifecycle of your company’s current fixed assets may give you some insight as well. Using the evaluation of the anticipated lifecycle of fixed assets vs the actual lifecycle can give insight to the value that asset brought into your company and if it’s something you would repurchase in the future. Using that data can be helpful to better plan for the acquisition of new assets by allowing those doing the purchasing to have all the information needed to make informed buying decisions.
Stay Informed on New Tax Rules
By keeping up to date on federal tax rules, which can often change, you can be sure that you’re aware of all the tax breaks and tax credits that your business is eligible for.
As an example, the 2018 Bipartisan Budget Act “allowed an additional $35,000 in expensing through 2017 for empowerment zone businesses, investment tax credits for various energy properties, and extended energy-efficient commercial building deductions” according to an article at Sage.
With continually changing rules and guidelines, it can be challenging to keep up. However, not keeping up these important changes may mean your business misses out on huge financial savings at tax time.
Increase Employee Productivity
One of the biggest expenses for many businesses is employee wages. When employees are spending their time trying to locate specific fixed assets, it’s time taken away from the job they were hired to do.
The employees that are in charge of asset management will no doubt be able to do their jobs better, as well as faster, if you have a good asset management system in place. Reducing the number of hours needed to properly check and log your company’s fixed assets will save money when it comes to paying employees for those hours.
No matter the size of your business, implementing an efficient and organized way to track your fixed assets is an almost guaranteed way to ensure you’re able to recognize ways to save money on fixed assets. It’s not just about saving money on the purchase of fixed assets but reducing fixed asset related costs which you can only do when you have all of the crucial information needed to be able to evaluate and keep track of your fixed assets.
At Assertive, it is our goal to help you save money by ensuring you have an effective and accurate fixed asset management system. We have helped some of the world's largest corporations build fixed asset management systems, that identified and prevented theft, provided data security, keep track of remote assets and ensured savings.