Sage Fixed Assets Depreciation: Let’s Show Some Appreciation

Fixed asset tracking is an often undervalued (pun intended) business finance function. While payables and receivables require near constant attention and payroll muscles in every week to steal the show, fixed asset tracking hums along in the background, rarely making a peep. We think it’s time to give fixed asset tracking, specifically depreciation, the attention it deserves. Here we lay out some evidence for why your depreciations could use some appreciation — and we’ll introduce Sage Fixed Assets the perfect fit for managing fixed-asset lifecycles and depreciation calculation.

Watch the on-demand webinar: Sage Fixed Assets – Powerful Depreciation Calculation

Ghosts and Zombies Lurk Year ‘Round

Ghosts and zombies can haunt you long after Halloween is over and you’ve eaten all the leftover, bite-sized Snickers bars. All puns aside, ghost and zombie assets can result in some serious tax liability, compliance-standards violations, and profit loss.

It can be easy to miss ghost assets in those scary spreadsheets you’re using to track assets. But these little gremlins can wreak havoc on your financial statements and could expose you to fines, penalties, a damaged reputation, loss of customers, a decrease in profit margins, and even jail time for executives. It’s true, in a 2019 Aberdeen study, 25% of respondents noted jail time as a prominent risk of noncompliance. While zombie assets generally don’t carry the same compliance risk as ghost assets. Instead, they can make a frightening hit to your bottom line. Since you’re not depreciating them on your income statement, you’re missing the benefit of reduced tax liability. Boo.

What are Ghosts and Zombies in Fixed Assets?

In the spooky world of fixed assets, “ghosts” and “zombies” aren’t just Halloween creatures—they’re financial phantoms that can haunt your balance sheet year-round. Ghost assets are those that have vanished from existence but are still being depreciated, leading to overstated asset values. On the other hand, zombie assets are still in use but have stopped being depreciated, resulting in understated expenses.

These spectral assets can creep into your records for various reasons. Perhaps an asset was disposed of but never removed from the books, or maybe it was transferred to another department without updating the records. Sometimes, assets get damaged or destroyed but linger on the balance sheet like a ghostly apparition.

The consequences? Overstated asset values, incorrect depreciation expenses, and inaccurate tax calculations. These financial missteps can lead to misleading reports and poor decision-making. So, it’s crucial to exorcise these ghosts and zombies from your fixed assets effectively.

The Impact of Ghosts and Zombies on Your Business

The presence of ghost and zombie assets in your fixed assets can be more than just a fright—it can have a significant impact on your business’s financial health. Here’s how:

• Inaccurate Financial Reporting: Ghosts and zombies can lead to overstated asset values and incorrect depreciation expenses, resulting in misleading financial reports. This can affect everything from investor confidence to compliance with financial regulations.
• Inefficient Asset Utilization: When assets that are no longer in use or have been disposed of are still accounted for, it leads to inefficient asset utilization. This means you might be making decisions based on inaccurate data.
• Increased Costs: Continuing to pay insurance, maintenance, and other expenses on assets that are no longer in use can inflate your costs unnecessarily.
• Reduced Tax Savings: Missing out on depreciation expenses for assets that are still in use but not being depreciated can lead to reduced tax savings. This is a missed opportunity to lower your tax liability.

By managing fixed assets effectively, you can avoid these pitfalls and ensure your financial statements reflect the true asset value.

Sage Fixed Assets—Depreciation is Heavy on the “Treats”

In our work with companies large and small across dozens of industries, we’ve found that the most common depreciation software is Excel. Sure, it’s possible to perform depreciation calculations in Excel, and it’s possible you’ll get them right every month. But there’s also the possibility of data entry and formula errors that might not even get caught. Overlooking those errors can cost you dearly, as we note above. That’s why we recommend Sage Fixed Assets Depreciation.

The Sage Fixed Assets Depreciation module helps you accurately manage the entire fixed-asset life cycle—from acquisition to transfers and disposals. There’s flexibility built in with more than 50 depreciation methods (including a user-defined option):

• MACRS formula and tables (150 percent and 200 percent)
• ACRS, Straight Line (method for U.S. tax and financial purposes)
• Remaining Value over Remaining Life
• Declining Balance (with and without an automatic switch to straight-line at the optimum point)
• Sum-of-the-Years-Digits

In addition to the 50 depreciation methods, there are deep reporting capabilities within Sage Fixed Assets Depreciation, including more than 30 standard reports, including year-end financial statements, fileable U.S. IRS tax forms and worksheets, as well as Schedule 8 Capital Cost Allowances for Canadian T2 Corporation Income Tax Returns.

If you’re ready to get serious about this, note that Sage Fixed Assets Depreciation also includes the ability to allocate cost and depreciation for an individual asset or group of assets to more than one funding source and the ability to create budgetary books for asset budgeting projections.

Sage Fixed Assets Depreciation, Planning, and Tracking

Sage Fixed Asset Depreciation is part of the larger Sage Fixed Assets software that also offers Planning and Tracking capabilities. The best part? Sage Fixed Assets Depreciation is fully integrated with Sage 100. Ready to learn more about depreciation? Then you might appreciate our on-demand webinar. You can also download the Sage Fixed Assets datasheet for more information. As always, contact us with your questions.

Sage Fixed Assets: Complete Solution for Managing the Assets Lifecycle

Depreciation: Gain the flexibility to effectively manage the entire lifecycle of your fixed assets with the Sage Fixed Assets Depreciation module. Streamline year-end financial statements and tax returns, allocate costs, calculate depreciation, eliminate redundant data entry, and store digital images of important asset records.

Tracking: Simplify the task of keeping track of your fixed assets with automated inventory functionality and built-in reconciliation capabilities. Sage Fixed Assets—Tracking makes asset management a breeze.

Planning: Take charge of your assets even before they become fixed assets. Manage capital budgeting and construction projects in progress with ease and flexibility.

Reporting: Unleash your creativity with a wide range of custom reports. Add charts, graphs, and advanced formatting to your reports for a visually appealing presentation.

Implementing a Fixed Asset Management System

To banish ghost and zombie assets from your accounting records, implementing a fixed asset management system is key. Such a system provides a centralized platform for tracking and managing fixed assets, ensuring accuracy and efficiency.

• Asset Tracking: With real-time tracking, you can monitor the location, status, and condition of your assets. This helps in conducting multiple inventories concurrently and ensures that your records are always up-to-date.
• Asset Depreciation: Accurate depreciation calculations are crucial. A fixed asset management system can handle various depreciation methods, ensuring that your asset values and expenses are correctly recorded.
• Asset Reporting: Detailed reports on asset activity, including purchases, transfers, and disposals, provide a clear picture of your fixed assets. This helps in reconciling data and making informed decisions.

The benefits? Improved accuracy, increased efficiency, and reduced costs. By managing fixed assets effectively, you can eliminate ghosts and zombies, ensuring your financial statements are accurate and reliable.

Common Challenges and Solutions

Implementing a fixed asset management system isn’t without its challenges. Here are some common hurdles and how to overcome them:

• Data Migration: Moving data from an existing system to a new one can be daunting. Using data migration tools can simplify this process, ensuring a smooth transition.
• Integration: Integrating a fixed asset management system with other business systems, like accounting and ERP systems, can be complex. Working with a vendor that provides integration services can help ensure seamless connectivity.
• User Adoption: Getting users to adopt a new system can be challenging, especially if they’re used to manual processes. Providing comprehensive user training and ongoing support can encourage adoption and make the transition smoother.

By addressing these challenges head-on, you can successfully implement a fixed asset management system, ensuring your fixed assets are managed efficiently and accurately.

Conclusion

Ghosts and zombies in fixed assets can have significant consequences on a company’s financial performance and decision-making. Implementing a fixed asset management system can help to eliminate ghosts and zombies from accounting records, providing accurate and up-to-date information on fixed assets. However, implementing a fixed asset management system can be challenging, and companies must be prepared to address common challenges, such as data migration, integration, and user adoption. By understanding the impact of ghosts and zombies on their business and implementing a fixed asset management system, companies can improve their financial reporting, reduce costs, and increase efficiency.