Tracking down equipment and recording its model number, serial number and other details can be tedious and time-consuming. But, not having that data readily available can increase risk and lead to economic loss.
Both CFOs and risk managers have a vested interest in equipment inventory services and the data it provides. However, too often finance and risk departments work separately to collect, reconcile and use this data. To better leverage inventory data and maximize return on investment, organizations should look into synergizing efforts.
A detailed equipment inventory provides an organization with a full, clear picture of its assets. That leads to supportable insurable values data and reliable accounting records. The next time your organization undergoes a fixed asset inventory or detailed inventory – whether conducted as part of a property insurance appraisal or a financial compliance effort – finance leaders and risk managers should work in partnership to cleanse and fortify the data. Collaboration between departments can lead to optimal insurance coverage and more accurate accounting records, and maybe even improve other systems and processes within the organization.
Detailed Asset Inventory for Risk Management
With catastrophic weather events causing widespread property destruction and construction costs climbing, insurance companies are scrutinizing property values – for buildings and contents – at unprecedented levels. To mitigate their own losses, insurance companies want comprehensive appraisals, including detailed inventories of contents, to provide more accurate replacement costs.
This is particularly important for industries such as manufacturing and healthcare, where insurance companies often require greater detail about high-value equipment. This information may include item descriptions, serial numbers, purchase dates and estimated values. The information collected during a detailed inventory helps to optimize insurance coverage and minimize the risk of loss.
Leveraging the Data for Accounting
A detailed asset inventory, and its resulting data, can serve multiple functions. Typically, an accounting team will utilize asset inventory data gathered for financial compliance purposes. Realizing and communicating the multifunctionality of this data can help business leaders gain stakeholders and secure the necessary budget for future detailed inventory and reconciliation efforts – and that can significantly boost your organization's financial health.
Fixed assets are often the largest balance sheet component, so accurate records are paramount. Common issues that can arise include the following:
- Assets are moved, retooled or disposed of during their life cycle; these events going unrecorded, leading to “ghost assets” in the records.
- A lack of descriptive detail for specialized equipment or high-tech assets can lead to these assets being undervalued.
For example, if an asset is described on the balance sheet simply as "manufacturing equipment with a value of $100,000," it doesn't hold real value. By recording details such as type of machine, manufacturer, model number, serial number and location, your organization can better track your assets for return on investment – and assess equipment performance, unlocking better collaboration with operations management. In addition, an up-to-date and accurate asset record helps track depreciation, monitor value changes and make more informed decisions about future purchases.
Less Risk, More Reward
By recording asset inventory data with consistency, accuracy, completeness and ongoing control, you can see how accounting for these items is not a corporate burden but an economic tool.
The next time your organization is required to undergo a fixed asset inventory, think about the value in, not just “tying out,” the records. Consider performing a wall-to-wall inventory along with line-by-line reconciliation to the records. This detailed effort can unlock comprehensive cleansing and fortification of the data in the fixed asset register – creating a foundation for leveraging the power of your data.
This more comprehensive approach to the inventory process has the potential to add value to multiple departments and functions across the organization, including operations management, procurement, tax, maintenance and risk management.
If your organization is looking for property insurance appraisal solutions or needs a better handle on your inventory, our tangible asset valuation team can help. To learn more, contact us today.
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