The Cost of poor Fixed Asset Control
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People Costs
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Use asset tracking to dramatically reduce human error and the time required to adequately manage assets.
An organization’s people often cost the most when it comes to managing resources.
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One reason for this is the precious nature of their time, as every minute dedicated to asset management, spanning from inputting assets into the system to overseeing the entire lifecycle, comes at a financial expense. Especially when dealing with experts, the costs can escalate significantly; for instance, a solitary accountant devoting just one hour daily to fixed asset management can result in an annual cost of $10,000 for the organization.
Furthermore, the human factor comes into play, inevitably leading to occasional errors. Regrettably, some of these mistakes can have substantial financial repercussions, as we will soon explore.
The Cost of People-Related Time
Manual labor remains an integral part of most companies’ asset management. Despite the availability of automated, mobile and smart logging systems, only a minority of organizations actually use them. According to a survey by Deloitte, 54% of organizations still use paper format to capture asset data.
The Cost of People and Spreadsheet Errors
Based on a study and review conducted in 2015, it was found that approximately 94% of spreadsheets contain errors, with error rates ranging from 1.2% to 2.5%. While these error rates might initially appear to be within an acceptable margin of error, other research on spreadsheet inaccuracies has demonstrated potential cost impacts reaching into the millions of dollars, with estimates ranging from $4 million to $110 million. Stephen Powell, a researcher from Dartmouth University who conducted one of these studies, remarked that spreadsheets are often filled with data that goes unused and errors that remain unaddressed. They do not necessarily function as systems where inputs are transformed into outputs.
The Costs of Inaccuracies
Ghost Assets
Your organization is haunted by assets that aren’t really there, and these assets are costing you big-time.
Ghost assets exist on the books but not in reality; they’ve been lost, stolen or otherwise gone missing. Or an asset or quantity was simply entered in error. Or they’re still around but are no longer usable.
These are ghost assets, and they can cost your organization incorrect and unnecessary fees, like storage, insurance, and tax payments. (See the table to the right).
Unfortunately, ghost assets are common. Perhaps it shouldn’t be surprising: a 2015 survey found that retailers lost over $44 billion of assets to theft, error and unknown causes. Ghost assets can plague anyone. The U.S. Marshals Service lost track of thousands of two-way radios until they implemented a more effective fixed asset tracking system. A single 2013 Department of Defense audit turned up 15,600 pieces of missing equipment valued at $419.5 million.
As common as they may be, many organizations don’t account for ghost assets in their asset tracking and reporting. Seventy-four percent of small businesses didn’t understand how ghost assets impact their books, according to (Wasp Barcode Technologies’ 2015 “Small Business Report: Accounting.” Even scarier, 49% don’t know what ghost assets are. Organizations can’t fix problems they don’t know exist).
Duplicate Assets
Your organization is spending money to “replace” assets you already have and just don’t know it.
Another common error in asset management: reordering (or manufacturing) parts that an organization already has in stock or otherwise available, simply because they don’t realize they have them. Large organizations with many departments and locations can be particularly vulnerable.
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This problem can be particularly harmful when an organization needs to track many smaller-ticket items. For example, a school district might need to track thousands of textbooks, or a manufacturer might need to track the existing UPC codes of individual component parts. That’s a capability that exceeds most spreadsheets and general purpose databases
Compliance and Audit Costs
Modern asset management streamlines audits, thanks to complete, compliant reports populated with valid, verifiable data available at the click of a button.
Compliance is costly. The federal Sarbanes-Oxley Act, for instance, mandates regarding the accounting of assets, while other statutes require monitoring assets (e.g., for asset purchases under Title I funding in the education sector). The price of non-compliance is similarly high. Concentra Health Services, for example, had to pay $1.7 million for a lost laptop in 2014, while the Alaska Department of Health and Human Services paid a similar $1.7 million in fines for losing track of a USB hard drive. Fortunately, asset management is an area where these costs can be minimized and risks averted.