Blog body: Each piece of equipment is recorded on the register of fixed assets of your particular company. On paper, you are looking fine on your balance sheet. However, what happens when many of those assets do not exist?
It is the expensive issue of the ghost assets, asset, which show up on your financial records, but which are physically lost, misplaced, stolen, or unusable. Research surveys have found that this happens more than you imagine, and there are even reports that 1030 percent of the fixed assets of a company can be ghosts.
This guide will provide the answers to the most important questions concerning how these phantom items are sucking the budget out of you, and how these items can be removed forever.
What Exactly Is A “Ghost Asset”?
A ghost asset is anything on your fixed asset ledger that you cannot account for physically.
Think about it:
- The laptops were alleged to be in the storage room, and at no point were they ever paid back to the firm by the previous employees.
- The three infusion pumps that were in your records were scraped off to get parts, and the other was lost on interdepartmental transfer.
- The stolen or damaged power tools on a construction site, which were not taken out of the books officially.
These products are still on paper. Consequently, they will still earn your company a paycheck when they add no value. This is normally a consequence of manual tracking systems, such as spreadsheets, that are unable to match the actual movement, disposal, and loss of equipment.
How Are These “Ghosts” Secretly Draining My Company’s Budget?
Ghost assets lead to a wave of invisible financial leakages that extend much deeper than the cost of the replacement of the product. These are actual, periodical cash losses.
- You Are Paying Too Much in Taxes: Most businesses receive property tax as the value of the assets recorded in their fixed asset register. When one per fiveth of your booked assets is a ghost, then you are voluntarily paying by 15 per cent. To which property a year after year, a year’s property tax, that which you have no actual equipment of whatsoever.
- You pay too much in terms of the insurance premiums: Insurance premiums are calculated depending on the total amount of the declared assets. On records that you have added ghost assets, then you are insuring non-existent assets. It is a straightforward waste of your operational budget.
- You Are Wasting Money on Unnecessary Purchases: When an employee requires some equipment, they examine the equipment list. It does not say that it is not available; it just cannot be found (it is a ghost). Then what comes after hours of searching in vain? You authorize a purchase or a rental of something that you think you have had.
- You Are Losing Productivity: Non-existent time is an immense hidden work expense that is spent by employees searching for non-existent items. This would be the time that they can be engaged in activities that will earn them money, but instead they are scouring like vultures to catch onto a mirage.
How Do I Get Rid Of Ghost Assets And Stop Them From Coming Back?
It is impossible to use 20th-century tools to solve an asset problem in the 21st century. The answer is to have one source of truth that is reliable and on which your financial records are perfectly in line with your physical reality.
At this point, such a device as RFID (Radio Frequency Identification) technology plays a crucial role.
- Tag Your Assets: Each equipment will have a durable RFID tag on it. This assigns each item a distinct, electronic identity.
- Create a Digital Record: When tags are implemented, a new, clean database is created correlating this unique ID with financial data of the asset-purchase date, value, maintenance schedule, etc.
- Audit Within Minutes, Not Weeks: A handheld RFID reader is compatible with a handheld device, allowing you to scan a room or a worksite within minutes and not peruse a manual during the auditing process. The reader picks up the signals of all tagged assets, which are in boxes or on high shelves, and compares them immediately against your master list.
- Automatize Tracking: RFID readers at chokepoints (such as doorways or tool cribs) can automatically track movement of an asset, so a live history of its movement is available.
Under this system, you will have done a floor-to-book reconciliation. You know exactly what you actually have. You can now be sure of eliminating the validated ghost assets of your books to reduce your tax and insurance overpayment automatically. More to the point, the system is real-time, which never allows the appearance of new ghosts.
FAQs
What is the difference between “ghost assets” and “zombie assets”?
This is a common question. It is not there in your books, but a ghost asset, a lost, stolen, or scrapped asset. And zombie asset is physically there, yet you do not know you possess it. It was not duly registered on the asset register, and hence, you are not tracking, maintaining, or depreciating it. They are the signs of a failed asset tracking system.
How much of a problem is this, really?
It is an enormous, proliferous issue. According to authoritative sources and industry reports, 10% 30% of the fixed assets of an average firm are a ghost. In the case of IT, up to 25 percent of IT expenditure is claimed to be wasted on the management of non-utilized assets (e.g., unused software licenses).
Won’t a manual physical audit solve this problem?
One manual audit will tell you your current ghost assets, but it is painstakingly slow, and costly as well as labor. Once the audit has been complete, the problem begins all over once again because once some things have moved, others are lost or have been disposed of.
