A place for everything and everything in place!!
If you replace “everything” with the word “asset” in the above quote, it works like magic in any industry or any business. No this is not an article on “organizing”. In fact, this is a quick introduction to fixed asset tracking for all those who felt they understood the terms “fixed asset” and “tracking” but always felt there was something more to it!! Even for the more enlightened, there would be some takeaway.
What is a fixed asset?
Let us get the basics right by coming on the same page as far as what we understand by the term “fixed asset”. Typically there is hardly any distinction between the terms “fixed asset” and “asset”. All fixed assets are assets but vice versa does not hold true.
Fixed assets as the name suggests are those which are generally fixed like Property, Plant, and Equipment. These are long-term assets that are used by the business for the production of goods and services.
These have life more than a year and hence have depreciation in their value. Some fixed assets like land and property can’t have depreciation. Other assets, like the buildings, furnishings, equipment, etc have limited useful life and hence have depreciated value with time.
Fixed Asset examples
Common examples of fixed assets are the land, buildings, machinery, etc. Vehicles such as company trucks, Office furniture, Machinery, Buildings, Land fall in this category.
These are fixed assets because they are intended to help the business make food in order to earn income. Presumably, the business will own and use those items for many years, so they are listed as fixed assets on the balance sheet.
As an example, if you consider a restaurant, many fixed assets are necessary to run the food business effectively. A restaurant needs tables, chairs, a bar, refrigerators, ovens, dishwashers, and working heating, ventilation, and air conditioning (HVAC) systems, as well as many other items to make food and serve customers.
Similarly, every business has its own needs like a farmer needs a tractor and a landscaper needs trucks. Every asset which aids in running the business and is not the raw material being processed to produce the output for sale would become the fixed asset.
Asset Types and Fixed Asset
The assets can be broadly classified as tangible and intangible assets based on physical existence. The tangible assets are those that exist physically and have some value. Intangible assets are those that don’t exist physically but have value e.g. Brand Name, intellectual property rights. Fixed assets are physical in nature and are part of the tangible assets in the balance sheet.
The other type of assets classification is based on convertibility – current assets and noncurrent assets. Current assets can be easily converted to cash on a short-term basis typically sales. Non-current assets typically are not converted into cash and most fixed assets are the noncurrent type of assets.
Fixed Asset Tracking
Fixed assets become important to track since they are not only needed for business operations. When accounting for the financials of the business, these also play an important component as part of the balance sheet.
It is important to know where a fixed asset is located at any given point in time. This will ensure that operations run smoothly and efficiently. This makes it available when needed, as soon as needed, and where it is needed. This is the basic purpose of asset tracking.
Asset tracking is an age-old phenomenon and the importance of tracking them is a well-established practice that has become mandatory for any well-meaning and serious business. The simplest form of tracking is using a notepad and slightly better and more prevalent industry practice of using excel sheets.
As a next step came to the practice of using barcodes for identifying the assets with a unique identifier. Any asset with a bar code label can be easily scanned and identified the asset quickly. Thus making the data entry of the assets as it moves from one location to another. The bar codes have now been replaced with QR codes allowing more information to be stored and easily obtained using a scanner.
The above practices of tracking using paper, excel, barcode, or QR code – have a major lacuna that these are manual. These are bound to fail in case the person involved forgets or neglects to scan the asset as soon as it is received into a work area. Such lapses create incorrect information getting logged leading to wasted time anyways rendering the operations still in limbo.
Current technologies come to the aid here. It is now possible to track these assets on a real-time basis. Thus there is no need to manually track these assets. Today technologies like
Bluetooth Low Energy (BLE)
make this possible. The assets are tagged with asset tags instead of using a QR code or barcode. These tags are tracked inside the chalked-out area using gateways. These gateways then communicate with a central server providing information about which assets are located at any given point within the plant. The tracking done is continuous and also in real-time. Thus making it possible to know where the asset is located on a mobile app or even on a map of the plant on a web page.
Fixed Asset Tracking benefits
Some of the benefits of using such a modern real-time asset tracking system :
No more time and effort gets wasted searching for these assets
Makes physical count and reconciliation easy
Avoid unwanted purchase assets
Improvement in employee productivity when performing audits.
By identifying old assets one can reduce the insurance premiums
Accurate fixed asset financial statements.
Easily integrate asset data into enterprise systems
These benefits are both tangible and intangible, but the important thing is that it makes asset availability and tracking transparent and visible to all. This gives management a huge advantage and there is no need to discount one’s assets values.