Got your attention? Let me start by saying that although it would be fun, we won’t be looking at the famous TV Series, The Walking Dead or the classic movie Poltergeist for any examples of Fixed Assets, although one could argue that the movie props, cameras, buildings, etc. could certainly be tracked as a fixed asset. However, before I get too far off track, let’s take a look at what I mean when I say “ghouls.”
Have you heard the term “Ghost Asset” or “Zombie Asset”? Many have not, however they could be costing your organization time and money.
First, let’s take a look at a scenario which often creates a breeding ground for these “ghouls” of Fixed Assets.
This breeding ground is often created by managing your fixed assets in spreadsheets. Not only are spreadsheets a common place for the birth of Ghouls, they contain a lack of audit trail and change history, data integrity errors, complicated formulas that must be maintained and created, and more often than not, have no integration to your financial application, thus leading to manual data entry. How many of you currently use spreadsheets to manage Fixed Assets, outside of your accounting application? I only wish I could see a show of hands.
So, What are Ghost and Zombie Assets?
Let’s start with the Ghost Asset.
A ghost asset exists when an item is listed on a fixed asset register but is nowhere to be found physically, it has the appearance of “vanishing”.
So what does this mean for your company? It means the value of your company is artificially inflated, when you “take out or remove these ghost assets” from your register, the results mean lower taxes and insurance rates, thus saving your company money. Another consideration exists when removing these ghost assets, your P&L could take a significant hit.
What is a Zombie Asset?
Now, to offset the ghost asset, we look no further than to the zombie asset. The zombie asset is basically the opposite. A zombie asset can be found during the physical audit, however it is nowhere to be found on the fixed assets register. Another words, you can track down zombies to replace the ghosts! No, not really, but finding these zombie assets do bring value back to your company.
Now since we understand what these ghosts and zombie assets represent let’s take a look at a few things we can do to reduce the amount of ghouls showing up or not showing up in our fixed assets.
Eliminating Ghost and Zombie Assets
Here are a few suggestions:
- Perform periodic reconciliation of your assets. Compare your books to your physical inventory.
- Develop and implement good internal controls. Significant time is spent on receivables and inventory, hence the processes around other assets are often neglected and ignored.
- The balance sheet should be considered as important as the income statement.
- Consider replacing your spreadsheets with a true Fixed Asset module or application that is integrated into your accounting application.
View this short, pre-recorded webinar for more information about the “Pitfalls in Managing Fixed Assets with Spreadsheets” and how Fixed Assets for Dynamics GP can help.