Fixed asset depreciation refers to tracking fixed asset lifecycles and reporting their value for insurance and tax purposes. For any organization, it is a critical component of financial reporting. Despite this, many companies fail to accurately log and report on their fixed assets, overpaying insurance premiums and taxes as a result.

Depreciation of fixed assets is a challenging issue, but here’s how companies can get back on track.

Calculating Depreciation on Fixed Assets

Regardless of the industry, any organization will need computers, copy machines, desks, and office equipment to thrive. Each of these assets needs to be tracked and depreciated according to complex schedules, and an individual asset may depreciate according to a particular schedule or method.

For a company to calculate fixed asset depreciation, it is fundamental to know what fixed assets are on the books, or it will be faced with a complex and time-consuming problem. It’s not uncommon for businesses to manage their fixed assets inventory and depreciation schedule using spreadsheets, conducting ad hoc surveys of fixed assets when the staff has the time to update the records. The result can be a lack of record-keeping, causing the inventory to swing out of control.

While common, this method of managing fixed assets can be costly in terms of staff time and capital. Managing fixed assets manually in this way consumes considerable staff time that could be better utilized elsewhere. Moreover, if obsolete assets are incorrectly accounted for, companies may continue to overpay property taxes and insurance.

Inaccuracies and Overpayments

What is the cost of an inefficient fixed assets process? The average company overpays taxes and insurance on around 12 percent of its fixed assets. Since insurance premiums are typically calculated as a percentage of the total value of fixed assets, even calculating depreciation incorrectly may result in overpaying.

Deductions that would otherwise be available to companies can end up being missed. A company might end up paying more for its fixed assets than necessary, resulting in a higher total cost of ownership (TCO). Depreciating fixed assets inefficiently can lead to a company wasting capital it could be applying toward smart investments and helping it to grow.

Time and efficiency costs associated with staff are another issue. It takes a lot of time and effort for finance professionals to determine whether specific assets still exist at the company and whether they are depreciating properly. That is time that could be spent on higher-value tasks, such as ensuring GDPR compliance or producing strategic financial analysis for CEOs.

Moreover, assets that are not closely tracked can go missing or be stolen outright, requiring additional staff time, and costing the company even more money when they are replaced. As a result, many companies seek ways to get back on track to save money and time.

Get On Track with Sage Fixed Assets

Organizations can maintain a healthy fixed asset register and adequately ensure their assets through asset tracking software like Sage Fixed Assets. In addition to saving time, this also allows the finance team to concentrate its skills and abilities on projects of greater value to the company.

Find out more about getting back on track, accurately managing your fixed assets, and pay only for the assets your company uses with Sage Fixed Assets. Contact us today!