Asset Systems Inc.
I’m Alden Snyder and welcome to our podcast. Our last installment covered the first-time inventory, a by-product of which, in most cases, is an asset database that can be maintained and audited easily in the future. Today we will turn our attention to audit or confirmation inventories. These inventories start with some list of assets that may be used to create data against which to conduct in audit or a schedule to verify assets once the fieldwork is complete. The goal in all cases is to verify the accuracy on existing records.
Audit inventories present broad challenges from tedious and complex exercises lasting weeks or months to simple events lasting hours or days. The distinction between the two is the condition of the original source data. If the beginning data is out of date, generic, grouped, limited or similarly opaque, it’s value in the data acquisition phase is compromised.
If, on the other hand, the data has been regularly maintained at a granular level and assets properly tagged, the audit will be simple. Because the former is the more common circumstance, we begin by discussing how to approach these difficult projects.
The first step is a dispassionate review of the existing data. Ask the following questions:
• Has a prior audit been conducted? If so, how long ago?
• How complete is the data; does it cover all the assets in the scope or just a portion?
• Is the description data sufficiently complete and accurate to enable reliable identification of the assets in the field?
• Are the assets grouped or individually identified? Grouped assets a far more difficult to inventory than individual items.
• Have the records been maintained?
This list will provide a glimpse as to how difficult the project will be. Shortcomings in one or two can be accommodated in the project plan; missing the mark in all will indicate a time-consuming and arduous project awaits. Next, consider the reconciliation process. It is important that this be considered early in the process for several reasons. First, it will define significant elements of the data that needs to be collected in the field. Second, it may force a realistic definition of the project scope. Finally, and most important, it will clearly define the results that can reasonably be expected. The earlier these are presented, the better.
In considering the match process, a definition/approach is needed. Is there a single, well defined data element that can reliably connect the data in the list to the asset found in the field? If not, what other information matches will be sufficient to connect the results? A special case exists for extremely old assets that are unlikely to be found. We have encountered ledgers containing furniture dating back to the 1960’s and early personal computers that have long since departed. Removing them before starting the fieldwork will provide far better metrics on the success of the audit.
Determining the field inventory approach is the next step. Part of it is to carefully define the project scope. Topics to consider include:
• Which assets are in scope?
• Data elements to be captured
• Locations to inventory
• Project Schedule
Once the scope is complete, the data collection process needs to be created. This can range from checking items off a printed report to automatic network discovery software. While rarely is it one of these extremes, it does involve a thorough understanding of the most effective means to capture the required data. If using existing data, it will need to be placed in a suitable data environment and be accessible to those performing the inventory. The process for capturing that data and the extent to which it can be automated will directly affect the speed and cost of the project. Finally, making certain that adequate steps are in place to assure the integrity of the data is essential. All this needs to be well documented for those conducting the field work and adequate training needs to be provided as well.
At this point, it is wise to consider the use of a third-party service to conduct the inventory. A professional firm will usually be equipped with the know-how, an established process and staff to conduct the inventory with a minimum of reliance on the client. If the project is one which we have defined as difficult above, using an outside firm should be seriously considered. Many of the advantages of a third party include greater dedicated staff resources, guaranteed results, defined schedule and clear cost. A perceived disadvantage often is one of cost. While upfront cost may appear higher, outside firms know the cost to deliver a defined result and, in most cases, will not cut corners. The client in these situations can influence cost through thoughtful negotiations. We have seen many well-intentioned firms avoid third parties and later regret the decision.
Now with planning, timing, process and training complete, the inventory is conducted. The teams are deployed in the field and quality regularly checked. Supervision needs to be in place to resolve issues as they arise so not to impede progress. As the first data is available from the field, the reconciliation process should be tested to make certain it works as expected. Regular progress reports should be issued to keep all concerned informed of the progress and any significant difficulties encountered.
With the inventory phase completed, attention can now be directed toward the reconciliation. Working through the method defined earlier, results can be determined from the field inventory. It is important to understand that the typical reconciliation yields a low percentage of matches; it is often under 50%. The reason has to do with the starting data. Unless there is a direct means to connect the asset record to the asset found in the field this process requires speculation and often there is inadequate data to speculate. Do not be discouraged by this seemingly modest performance. If you have followed our guidance this will only occur on the first inventory, as future inventories will be automated and completed with a fraction of the effort.
Which brings us to the opposite situation. A well-organized inventory where assets are reliably tagged and recorded upon receipt allows audits to be performed simply in the future. The gold standard is to label assets with a scannable label (bar code or RFID). The same efficiency occurs to a reduced degree in environments using human readable tags.
Tagged inventories will usually establish and incorporate the inventory scope and reconciliation methods into the data base as assets are tagged. If formal asset management software is being used, the method conducting the field inventory is mostly defined by the application. That leaves only the staffing, training, and fieldwork with the attendant supervision to be done to complete the inventory. The reconciliation process is simply a matter of printing reports based on the results of the fieldwork. The entire process reduces the effort by 60% to 80% depending on to how well the database has been maintained.
Fixed asset audits have been dreaded by those involved for years. They represent a significant expenditure of time and money to confirm assets only to be repeated regularly thereafter. But with better planning and a willingness to invest in the right tools, the process can be automated and reduced to a far smaller undertaking and produce far better results. And what’s not to like about that.