Fixed Assets and Accounting: Much More than a ‘Nice to Have’
Honestly, fixed asset management and the related accounting is a rather dry subject – unless you are a CEO, CFO, COO, VP of Finance, VP of Manufacturing or Fixed Asset Manager at a manufacturing company. While often overlooked, if something goes wrong; if fixed assets are stolen, unused, improperly maintained or inaccurately accounted for, the negative business impact can be enormous. On the other hand, well managed and properly accounted for fixed assets contribute considerably to productivity, business growth, profitability and compliance.
Fixed Assets and the CFO
Most manufacturers that depend on fixed assets, and that is most manufacturers, use one software solution for supporting asset management and another to handle the financial reporting and accounting aspects of fixed assets. Just focusing on the financial/accounting portion for now: The CFO and finance department MUST account and report on fixed assets on an accurate and timely basis. Since fixed assets show up on the balance sheet, inaccuracies or misstatements can lead to audit failures including SOX.
Going beyond the pure compliance aspects, however, CFOs know that one of the biggest cash outlays a manufacturer makes, along with staffing and supply chain costs, is on fixed assets. CFOs want to ensure that, therefore, a company’s fixed assets are used effectively and capital spend results in optimal return on investments, which results in better profitability.
The Fixed Assets Accounting Challenge
Unfortunately, maintaining fixed asset accounting data and accurately reporting the asset side of the sheet is not simple. CFOs and their teams face three primary challenges to ensure excellent fixed assets accounting and reporting:
- Data Integrity risk from poor user experience and non-integrated software: The fixed asset accounting/finance solution may come from a different vendor than the general purpose financials solution. Or the fixed asset solution may come from a different vendor than ERP and/or enterprise asset management solution. In fact, every participating software package that has a different core data model than the fixed assets solution introduces risk. Why? Ensuring data integrity across multiple data models is always difficult and without paying extreme attention to the matter, data errors inevitably arise. Every time one of the participating data models change, it causes the undesirable ripple effect of reintroducing data integrity risk. Since the life cycle of all of these participating solutions is typically measured in years, often more than five years, the data integrity risk situation never really goes away.
Perhaps this goes without saying, but at some point data must be entered for fixed assets accounting purposes. Is the user experience easy to learn, flexible and intuitive? Does it matter where the asset information is initiated? That is, there are many places to initiate asset data across several solutions, but it shouldn’t matter as long as they all share the same data.
- Lack of life cycle coverage and flexibility: Every fixed asset has a lifecycle, including acquisition, useful life and disposal. Different types of fixed assets require different accounting calculations and depreciation schedules. Too often, however, the fixed asset accounting and reporting solution does not handle the different accounting techniques required across the life cycle. Too often the choices for formula and depreciation approach are limited. Particularly for global manufacturers that must comply with local accounting rules, the ability to account for and report a fixed asset’s life cycle using a comprehensive set of calculation techniques is mandatory.
Of course, there are those who choose a limited solution and “make it work” through manual workarounds, which inevitably lead to that data integrity issue again.
- Global capabilities: Small manufacturers with a single site, a quite limited number of fixed assets and a simple, predictable supply chain may not experience this challenge, but global manufacturers do: Does the fixed asset solution support multi-currency, multi-GAAP and multi-entity situations? If not, the only path forward is again through workarounds, which undercut accuracy, timeliness and potentially compliance – all areas the CFO really cares about.
Introducing QAD Fixed Assets with the Adaptive UX
Along with the evolution of QAD Adaptive ERP comes an entirely new user experience within QAD Fixed Assets, called Adaptive UX. The familiar functionality and concepts from earlier product versions have been refreshed and improved to offer tangible benefits for fixed asset managers to help obtain the best value for money on capital spend. With Adaptive UX, asset records are easily created and it includes a redesigned depreciation algorithm for more flexible and accurate calculations. Combined with the inherent capabilities of QAD Adaptive ERP, the harmonized flows change how you manage fixed assets. Some key competencies include:
- An integral part of QAD Adaptive ERP and QAD Financials, QAD Fixed Assets reduces costs of third party integration and lowers data integrity risk.
- Accurate reports allow identification of unused or stolen assets positively affecting cash generated from asset sales and reduced insurance premiums.
- Action center KPIs provide immediate information on all your asset classes for sanity checks on asset values across domains.
- Depreciation calculations were designed out-of-the box for manufacturers which includes an easy-to-use customization to support unique requirements.
- Integration with QAD Financials and QAD Enterprise Asset Management provides continuity of transaction flows and processes.
- Access to QAD Enterprise Platform for the flexibility of extending screens to meet specific requirements.
QAD Fixed Assets with Adaptive UX and native QAD integration offers a pathway to fixed assets best practices at the touch of a button and using a single data model. The life of the finance department is made easier due to clear role management and a modern UX. Asset values are easily maintained and updated when asset usage or location changes. Audits are facilitated due to links to asset locations and pictures of each asset stored in the system record.
The complete asset history within QAD Fixed Assets allows an enterprise to learn more about their assets and identify trends during assets’ life cycles to help maximize the income generating capacity of the asset base.
Who Wins with QAD Fixed Assets?
- Manufacturers of any size who require an automated single solution for asset management.
- Enterprises with multiple global locations who require multiple fixed asset books and currencies enabling accounting and taxation compliance in many countries at once.
- Manufacturers that choose the combination of QAD Fixed Assets and QAD Enterprise Asset Management enjoy a more efficient asset management operation whether assets are purchased or built in-house.
- The finance department, who is more ready and willing to provide accurate information to senior management for effective and timely decisions to stay ahead of competitors. Effective asset usage is one of the first steps in this process.
QAD Fixed Assets with Adaptive UX is now available to offer fully integrated fixed asset management for manufacturers of all sizes and to help ensure the best ROI on capital spend.