Best Practices for the Management of Fixed and Moveable Assets
Regardless of whether your responsibility is for a single building, multi-buildings, or a multi-site system, proper management of real property assets is crucial to mission, a process better known as asset management. The first steps of asset management are to identify and record; next to evaluate, plan and fund; and finally the programs to preserve and protect real property assets.
The management of fixed and moveable assets is an accounting process that seeks to track assets for the purposes of financial accounting, assessment, preventive maintenance, and theft deterrence.
Many organizations face a significant challenge to track the location, quantity, condition, maintenance, and depreciation status of their assets. A popular approach to tracking assets utilizes serial-numbered “asset tags” with bar codes for easy and accurate reading. Periodically, the owner of the assets takes inventory with a mobile barcode reader and then produces a report.
Off-the-shelf software packages for asset tracking and management (work orders) are marketed to small and large businesses. Over the past decade, most software packages have evolved into preventive maintenance (PM) software packages, of which the asset tracking, work orders, and reporting components are a primary function. As PM software has evolved, so has its name; today it is referred to as Computerized Maintenance Management Systems (CMMS) software; discussed in more detail in the Physical Maintenance section of this blog series.
A physical wall-to-wall validation of all fixed and moveable fixtures, furnishings, and equipment (FF&E) is required for a complete and accurate asset listing. Many large businesses find contracting a consulting firm to provide this service is best. The process is time-consuming and may not be practical for in-house work.
Tracking assets, fixed and moveable, is an important concern of every company, regardless of size. Fixed assets are generally defined as any ‘permanently installed’ object that is part of the plant facility, and moveable assets are moveable objects used internally by the business and may include appliances, maintenance equipment, vehicles, furnishings, computers, tools, software, or office equipment. Without an accurate method of tracking assets, especially moveable assets, it would be very easy for a company to lose accounting records or even physical control of them.
Asset tracking software allows a company to track:
- The assets it owns
- What assets it leases
- Where each is located
- Who has it
- Cost and depreciation
- Vendor and critical identification data
The reporting option built into most asset tracking solutions provides pre-built reports, including assets by category and department, net book value of assets, assets past due, audit history, technical and vendor information, and transactions. Service records and scheduling the asset for maintenance is more a function of the CMMS software. Companies can reduce expenses through loss prevention, reduce new and unnecessary equipment purchases, and can more accurately calculate taxes based on depreciation schedules.
The most commonly tracked assets are:
- Buildings and systems
- Furnishings, art, and accessories
- Kitchen equipment
- Health and fitness equipment
- Office equipment
- Medical equipment
- IT equipment
- Entertainment equipment
- Maintenance equipment and tools
- Software licenses
The asset tagging procedure usually involves:
- Handheld data collection devices to capture asset attributes at the point of entry. The operator enters item tag number, location, description, manufacturer, model and serial number, capacity, etc. depending on the sophistication of the software.
- Industrial-strength tags are affixed in a predictable location on the asset
- Monthly updating to keep records current with asset additions and disposals
- Review asset tracking reports to ensure accuracy and proper record maintenance
For-profit organizations, especially with large asset inventories, get significant tax advantages by “componentizing” assets. Each taxing jurisdiction establishes taxable values and depreciation rates. Fixed assets providing utility services to equipment constructed as part of a building can be depreciated per the equipment depreciation schedule versus, say, a 40-year building depreciation rate. An example would be kitchen equipment requiring electrical wiring and devices, gas pipe systems, plumbing or waste systems; these auxiliary systems can be depreciated with the equipment.
Certain components of assets, such as software or training costs wrapped into the overall equipment cost, may not be taxable at all. Recording some building or equipment assets component-by-component instead of as a bulk-entry can have significant tax benefits. Upgrades can be assigned to relevant components, extending tax reductions over the lifecycle of the asset. These incremental benefits can mean millions in tax savings.
Proper identification and recording of real property assets is the foundation of all asset management programs. Without it, your asset management program will have limited success and may put your mission at risk.
About the Author:
John zumBrunnen is Founder of zumBrunnen, Inc., an independent construction and building consulting firm founded in 1989. zumBrunnen has a BS in mechanical engineering from the University of North Dakota, completed the US Army Corps of Engineers Training Program in 1972, and is a member of LeadingAge and Community Associations Institute on national and state levels. zumBrunnen has 40+ years of experience in construction, property assessment, medical office building reserve study, development, and reserve budgeting. He is the inventor of the FacilityForecast® software system and a respected author and speaker in the industry.