- Published: Monday, 28 October 2019 17:28
Bad Asset Tracking Creates Ghost Assets
6 Reasons Ghost Assets SHOULD Scare You to Death
By: Shannon Corgan, Director of Marketing
Asset tracking can present many challenges when you have a large asset inventory that's being used by a large mobile workforce across multiple job sites. When you're tracking your assets, it's inevitable that you'll end up with ghost assets. Ghost assets are fixed assets that you have on your general ledger, but you can’t physically locate the assets. This may have happened because the fixed asset was lost, stolen, broken, damaged, replaced, or sold without informing your accounting department. A study by Gartner showed approximately 30 percent of organizations don’t know what fixed assets they own, where the fixed assets are, and who is using these assets. It may seem like a tedious unnecessary task to keep your accounting department informed about the status of your fixed assets, but here are six reasons ghost assets should scare you to death:
Increased Insurance Premiums - Your insurance premiums are based on the value of your fixed asset inventory. Have you thought about how your ghost assets are making your insurance premiums creep up? If you have ghost assets that are still appearing on your balance sheet, but you can no longer locate them for a variety of reasons, you are paying insurance premiums for assets that are not available to be used. This has a serious impact on your company's productivity and drives up your business expenses for insurance premiums unnecessarily.
Increased Taxes - Accurate asset tracking of your fixed assets is critical if you want to pay the proper taxes for fixed assets you own. If you have more fixed assets on your balance sheet than you can actually physically locate, you are increasing the asset inventory that you own. When fixed assets aren’t properly accounted for on the balance sheet, your company could overpay on income and property taxes for assets that have vanished and are no longer owned by the company. Overstating the value of the assets you own could have a big tax impact on industries that operate in the construction, utility, oil, and gas, and transportation based on the expensive equipment needed.
Decreased Productivity - If you have a ghost asset, you are decreasing your productivity. Your assets are tools and equipment that are supposed to help your employees get more work done easier and faster. If you don't have a good asset tracking system in place, your employees are spending time looking for ghost asset and they’re also not getting the work done that is needed on your projects. They’re spending time making phone calls, sending texts, and emails to find out where a piece of equipment or where a tool is. These unproductive labor hours aren’t helping you finish your projects on time and are driving up your labor costs without any productive output.
Increased Asset Replacement Costs - If you have a ghost asset that has mysteriously disappeared, it’s pretty obvious that if you can’t find the piece of equipment, then you can’t perform routine maintenance on the tool or piece of equipment. As a result, instead of getting full use of the asset during its entire asset life by repairing the expensive tool or piece of equipment, you will have to replace the entire piece of equipment or tool for the full replacement cost sooner than you had planned. This increases your fixed asset costs and increases expenses sooner for your business. In addition, if you have two generators in your asset inventory and one is a ghost asset, you are over-utilizing the one generator available and drastically reducing the asset life and increasing your asset expenses.
Increased Maintenance Costs - When you don't have an asset tracking system to show any maintenance contracts associated with a piece of equipment in the same place that you track your asset inventory, you could be paying for maintenance fees on a piece of equipment or a tool that can't be located. Ghost assets drive up your maintenance costs for any fixed assets on a maintenance contract. Also, if you don’t keep your asset warranty information easily accessible to everyone in your organization that can be accessed from any mobile device, you could be overpaying for maintenance or repairs on assets that should have been covered under the warranty.
Theft of Fixed Assets - Without an asset tracking solution in place that keeps your asset inventory and asset assignments up-to-date, unfortunately, dishonest employees can take advantage of this and steal company tools and equipment. If you don’t have a centralized location for your fixed asset inventory and the ability to easily see who is assigned to a piece of equipment or tools, your company could be at risk. According to The National Insurance Crime Bureau, the cost of heavy equipment theft varies from around $300 million to $1 billion. When company tools or equipment are stolen it’s not always taken by employees. Depending on how well your tools and equipment are secured on your job sites, there are plenty of criminals lurking around your job sites to take advantage of this too. When equipment is stolen and not reported to your insurance company, you’re still paying insurance premiums on the equipment you no longer own. That’s costing you money.
If you are looking for an asset tracking solution to centralize all of your inventory in one location with accurate asset assignments, click here to learn more.