How to Reconcile Fixed Assets: A Comprehensive Guide
Fixed asset management is one of the major talking topics for any organization on its journey toward operational efficiency and financial accuracy. In the form of machinery, equipment, vehicles, and property, fixed assets have become the backbone of most businesses. However, their records are very difficult to maintain with respect to maintaining values in concurrence with financial records. It is now that fixed asset reconciliation assumes center stage.
In this blog, the importance of fixed asset reconciliation, how it is done step by step, and how technology such as RFID and QR code can make things easier will be discussed.
Fixed Asset Reconciliation: What is it?
Fixed asset reconciliation is the reconciliation of fixed assets that an organization would prove against the physical existence of fixed assets, as reflected within its accounting and asset management records. There is also the reconciliation of the physical stock for consistency with the purchase record and financial statements.
This is where correct reconciliation of the asset ensures that financial reporting, tax, and compliances are correctly done along with optimum utilization of the assets at minimum operations risk thereof.
The reconciliation helps in control of valuation of such industries who involve high value wide assets like health care, information technology, retail and manufacture.
Why Fixed Asset Reconciliation is Important
1. Financial Accuracy: Reconciliation ensures the valuation of the assets is right, not wrong, which could lead to misleading stakeholders or even attracting financial fines.
2. Compliance: Proper records of fixed assets are provided to the auditors and regulatory authorities. Reconciliation assures conformation to tax laws and standards w.r.t. financial reporting.
3. Fraud Detection: Reconciliation helps in finding the unauthorized usage, mismanagement, or theft of the assets thereby saving an organization from financial losses.
4. Cost Economies: The idle or underutilized assets could be identified by the companies and they may take proper decisions regarding reallocation or their disposal hence saving unnecessary costs.
5. Fixed Asset Life Cycle Management: Accurate records will, therefore, let the business know the life cycle of every asset, thus creating time and space for scheduled maintenance and replacements.
How to Reconcile Fixed Assets
1. Prepare an accurate Asset Register
This is actually the very basics of any reconciliation. It should includeL
- The description and serial/unique number that is used to identify the asset;
- The date of purchase, and acquisition cost,
- Depreciation schedules,
- Place and the name of its custodian who has custody of,
RFID tags or QR codes make it much easier to track and update all information about these assets.
2. Physical Audit
The existence, location, and condition of all the assets are to be physically verified. This is vital in a case when there is a need to identify the discrepancies-those that have been either irreparably moved or are simply missing.
Key Considerations:
- Auditing is pretty easy with a hand-held RFID scanner or a QR code reader
- Anything noticed on hard copy should be written out for further investigation
3. Reconcile Financial Records
The asset register will be compared against the relevant financial record about:
- Purchase invoices
- Schedules of depreciation and amortization
- Insurance policies
These variance explanations are accounted for updates in the asset value written off items.
4. Account of Discrepancy
Full reconciliation clears some of the discrepancies that are supposed to be brought in, including adding newly acquired assets in the register, writing off those retired or lost, and correcting the depreciated value with regard to use or damage.
5. Automate with Technology
It would, therefore, be a plus if the business adds to this RFID or barcode tracking in an asset management software capable of reducing such need for manual reconciliation to the barest minimum. Some of these tools do automatic tracking in real-time and update the records themselves, making them not only updated and correct but also easy to access.
Fixed Asset Reconciliation – Challenges
Asset reconciliation, though key, is quite cumbersome for a variety of reasons, including but not limited to:
1. Manual Errors: It also leads to error-prone records that, over a period of time, may mount up to huge differences.
2. Lost Assets: It happens quite frequently in big companies when the assets get misplaced, basically in active areas such as a warehouse or a building site.
3. Incomplete Information: Old or partial records make reconciliation cumbersome processes, and sometimes the threat of regulatory incompliance does not leave them.
4. Lack of Technological Integration: Most organizations are used to working with spreadsheets or some kind of obsolete systems through which real-time tracking is unattainable.
Fixed asset reconciliation is made simpler using technology in the following manner :
1. RFID for real time tracking
RFID tags give real-time tracking of an asset. RFID readers can read various assets at one time. Due to this, there isn’t much wastage of time in the physical audit.
2. QR code for easy identification
They are efficient and inexpensive; thus, enabling the companies to create a complete record of an asset by just using a smartphone or a handheld scanner.
3. Asset Management Software Solutions:
The recent software solutions systematize asset information, automate the calculation of devaluation, and also provide extended audit reports.
4. Integration with Financial Systems: Easy integration of asset management systems with accounting software ensures error-free reconciliation, and financial reporting is done precisely.
Fixed Asset Reconciliation Best Practices
1. Audits
Physical audits, to be carried out quarterly or annually, will update the records and locate discrepancies well in time.
2. Asset Tagging Standardization
Standardized RFID tags or QR codes will do the work of tracking easily and uniformly within an organization.
3. Automation
Automation of reconciliation processes, with tools provided by Acube InfoTech, saves much time and improves accuracy.
4. Employee Training
Educate staff on the importance of reconciliation and how to use asset management tools effectively.
5. Log discrepancies
This will provide the capability to log all discrepancies with their Effective Resolution Dates for accountability and complete transparency.
Why Acube InfoTech Fixed Asset Reconciliation?
Appreciating the headache of fixed asset management, Acube Infotech has designed an innovative solution for this purpose, that involves a radio-frequency identification and QR-code tracking systems in order to efficiently manage reconciliations.
We provide holistic asset management software, RFID solutions updating the real-time status of every asset, and QR-code systems economically tagging assets. Integrations into financial systems are also provided for seamless reporting. Partner with Acube Infotech, rest assured, your organization will manage its assets to perfection, optimize costs, and move at par with ever-changing regulatory norms.
Conclusion
Fixed asset reconciliation speaks not only to financial accuracy but also to operational effectiveness and compliance. Whereas painful to implement effectively, it just became easy the moment one thinks of embracing modern tools like RFID along with a new version of Asset Management Software.
Allow Acube Infotech to take away all pains related to asset reconciliations. Let processes be smooth and watertight in asset management. The time has come now to walk better toward asset control and financial transparency with Acube Infotech.
