Your physical assets represent a significant proportion of your company’s value. Operational, maintenance, depreciation and compliance costs will affect your financial reports. Asset audits help you keep track of your assets, their costs and their usage is important for financial and operational management.
Whether it’s by an outside party or by utilising your existing personnel so you can understand what you actually have, not just what you think you have.
This is separate from ongoing asset management where you have a business process in place to update your asset information at the key stages within the business.
Physical asset audits have tended to be a labour and time-intensive manual process but with the right technology, what was once an onerous admin task can be done in less time, more efficiently and become a regular business improvement opportunity.
What is an Asset Audit?
An asset audit is a systematic and comprehensive identification and verification of a company’s physical assets. Physical assets encompass a huge range of items from inventory to facilities, machinery and equipment to tools, technology and even fire and safety equipment assets. The type, data and value of assets that can be recorded is almost limitless..
During the asset audit, you will be verifying the existence, condition, and value of your assets, ensuring that they are accurately represented in the company’s financial records, asset register or critical management systems.
Your staff or external auditors will physically locate and inspect your assets onsite and cross-reference the information in your asset register if you have details already.. Traditionally this was a highly manual process but the introduction of asset tagging (attaching a unique reference number to the item using barcode, QR or other technologies) means that items can be identified, updated and logged far faster using handheld scanners, phones or tablets. These update records in realtime to a cloud platform. What used to be a task that would last for weeks and generate huge amounts of paperwork, can now be done in days.
Why You Need to do an Asset Audit
1. Accurate Financial Reporting
Asset audits are essential for maintaining accurate financial statements. When your assets are properly accounted for and valued, your balance sheets and income statements reflect the true financial health of your company. This is crucial for streamlining your tax liability, attracting investors, securing loans, and making informed business decisions around budgets and capital spend, not to mention your reporting requirements for regulatory bodies such as HM Revenue & Customs (HMRC).
2. Digitally managing operational equipment
Managing up-to-date asset data hugely improves transparency, asset visibility, compliance and the management of critical systems. It provides insight and helps decision-making when it comes to utilising current assets and purchasing the best new equipment for the job..
3. Preventing Fraud, Mismanagement and Financial Loss:
Asset audits help you safeguard your assets. They help prevent theft, misappropriation, or misuse of company assets by identifying discrepancies between current records and the actual asset situation. Asset management software like Assettrac enables businesses to track their assets, their location and other necessary information in real-time, massively reducing loss or straining budgets by over-buying simply because assets aren’t known or can’t be located.
4. Optimising Resource Allocation
By moving from annual or quarterly asset audits, businesses can use technology to run real-time asset reporting. With real-time asset reports, you can accurately manage inventory, maintenance, replacement and disposal, as well as improving productivity by making sure the correct equipment is available in the right place at the right time. This has been shown to dramatically improve productivity and speed of processes helping businesses save time and money.
5. Risk, Health & Safety
By having up-to-date reports on the status and location of equipment and more accurately managing maintenance, you can reduce risks linked to health and safety and the massive costs to the business, people and productivity that represents. Utilities companies, like Cappagh Browne, have tailored their asset management systems to track vital safety and work equipment for remote teams. As a result, they not only improved management’s peace of mind but also reduced their ‘paper’ information trail from 6 weeks to instant.
When and How Often Should You Conduct Asset Audits?
The timing and frequency of asset audits will depend on various factors, including the size of your business, industry regulations, compliance requirements and your specific asset management needs. However, here are some general guidelines:
1. Annual Asset Audits
For most businesses, an annual asset audit is the minimum requirement. This is sometimes also set by the company’s financial auditors. The frequency ensures that your assets are up-to-date as required for your financial measurements, However this figure is a record from one moment in time in a year and has limited benefit for ongoing operations throughout the following year. The data may not be sufficient to support the needs of your operation, business improvement initiatives or adhoc reporting.
2. Trigger Events
Audits conducted in response to significant changes within your business, such as mergers, acquisitions, or changes in leadership. Businesses using just an annual audit cycle approach can find they are forced to invest additional time and money into what is the equivalent of an annual audit when there may also be other budget and resource pressures in the organisation. When choosing tagging and asset tracking technology, companies gain the opportunity to provide instant current reports without having to apply significant additional time and manpower.
3. Industry-Specific Requirements
Some industries, like healthcare and finance, have specific regulatory requirements that may necessitate more frequent audits that fall outside of the company’s annual financial reporting cycle. Once again, frequent manual audits can be slow to provide the necessary reports and come with an added cost.
4. Continuous Monitoring
In addition to periodic audits, businesses can consider implementing continuous tracking and monitoring solutions, such as asset tracking software. This helps them gain an accurate picture of physical assets and their status, location and value on a day-to-day basis. This has been shown to not only save time on reporting but to significantly improve productivity, security and adherence to compliance regulations and provide accurate data for customer reports.
Asset audits shouldn’t simply be an administrative chore; they can be a vital component of effective asset management and operational efficiency.
Beyond satisfying regulatory and accounting requirements, asset audits offer a range of tangible benefits to your business, from improved operational efficiency, accuracy in financial reporting and budgetary control to data-driven decision-making for productivity, competitiveness, risk mitigation and real-time digital reporting.
A well-executed asset audit can be a strategic tool that propels your business towards greater success and resilience in today’s competitive landscape.
If you’d like to discuss any aspect of an asset audit, tags, asset software or all – please get in contact to gain more details for your circumstances.
enquiries@assettrac.co.uk // +44 1273 491267
