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Do fixed asset inventories waste money?

Do fixed asset inventories waste money?

Well managed organizations are required to perform regular fixed asset inventories or audits. In particular, public sector entities are required to count all fixed assets, often annually. This has resulted in procedures that saddle the existing management and staff with the duty to conduct the asset counts. The field inventory is preceded and followed by significant efforts by the administrators to prepare for the count and digest the results.

Oddly, there is a widely held belief that this manual approach is the lowest cost option for compliance. But is that fact or fiction?

The process of most organization's asset inventory was (and still is in many cases) nothing short of laborious and took several years to refine was originally developed based on comparatively primitive applications. Little use is made of technology to streamline the process or improve either its accuracy or efficiency. Today's data collection and database management tools provide capabilities that can profoundly reduce the cost and complexity of the effort.

Here are several areas where savings can be achieved:

  • The preparation of working papers for the inventory.
  • Manually updating records with the results
  • Assigning the inventory work to managerial, professional, or administrative staff can be eliminated and replaced with clerical personnel.
  • Reconciliation of assets can be automated.
  • Introducing bar code or RFID tagging can automate data collection and improve accuracy.

To realize these benefits, all assets must be suitably tagged and entered into a usable database. Often this effort is mistakenly perceived to be quite costly and complex. While individual costs vary, we find that existing data is often usable and can be converted to provide a starting point. Using this data, the tagging (or retagging) process can be accomplished during the required field inventory with little incremental cost. Once complete, all future inventories are well defined, automated efforts that can be accomplished in a fraction of the time and provide greater accuracy.

Why, in the face of ample evidence to the contrary, do organizations cling to their outmoded, inefficient process?

Typically, it is the myopia of current incremental cost. Automating the inventory process is a onetime investment in software, hardware and tagging. The existing process is thought to be "free" as all the inefficiencies are already budgeted. Actual cost of the present approach is unknown and many times virtually impossible to calculate with any degree of accuracy. Our experience with hundreds of clients provides ample evidence of this widespread problem.

As this year's annual inventory season begins, there will be far too many organizations persisting with this ostrich approach paying too much for mediocre results. Except for the few smart, well managed ones who prefer to invest their money in long term solutions and savings. Which will you be.