How to Save Money with a Better Fixed Assets Depreciation Process

Fixed assets are assets purchased for long-term use, such as buildings, computers, machinery, and vehicles. Fixed assets depreciation is the process companies use to track how these assets lose value over time. It’s easy to see how this happens. Physical assets like cars or machinery often lose value over time as they’re used and as newer, more updated versions are released. Now that the definitions are out of the way, let’s look at the ways companies may waste money by miscalculating the value of their fixed assets.

Fixed assets often represent a large percentage of a company’s overall value. They may be the biggest line-item on a company’s value sheet. Given the high value of these assets, even small errors in calculating fixed asset depreciation can be costly. On average, companies overpay taxes and insurance on about 12 percent of their fixed assets.

Tracking your fixed assets and calculating fixed asset depreciation can be challenging. In some companies, it’s a manual process. The finance team may even have to partner with other departments or locations that have their own processes for managing these assets, requiring your finance team to manually reconcile these processes and records with their own. This method of managing fixed assets and depreciation may look cheap on paper since it doesn’t require investment in new software or an increase in employee headcount. However, there are a lot of invisible costs that mean manually managing fixed assets deprecation isn’t such a great deal. The extra administrative burden for everyone involved can be time-consuming. It might take resources away from other value-generating initiatives. It’s also prone to error and can lead companies to overvalue their fixed assets, which leads to overpaying on taxes and insurance.

How Inaccurate Fixed Assets Depreciation Costs You Money

The most obvious way inaccurate depreciation calculations costs money is by overcalculating the value of these assets. In addition to higher taxes, this can lead to higher insurance premiums because these premiums are usually a percentage of the total reported value of a company’s fixed assets. Inaccurate fixed assets depreciation can also mean you miss about on deductions to which your business would otherwise be entitled. A company could face a higher total cost of ownership (TCO) for your fixed assets than necessary. All this could result in wasted capital—capital that could otherwise be used to pay down debt or make investments to grow your business.

Inaccurate depreciation calculations can bring the accuracy of your financial reports into question, which is a headache no one wants. Fixed assets that aren’t tracked properly can also go missing or get damaged beyond repair, which consumes more staff time and additional investment in the form of replacement costs.

How To Manage Fixed Assets Depreciation the Easy Way

There’s a way out of manual reconciliations, miscalculated depreciation, wasted employee time, and lost capital. Investing in fixed assets management software can automate this process, including automatic depreciation calculations. It will allow your finance team to focus on higher-priority initiatives that could benefit your company. With a better tracking system in place, fewer fixed assets will go missing and you may be able to implement a more regular maintenance and repair schedule, lowering your replacement costs and giving you a better TCO. Your financial reports will be more accurate, and you might even be able to track regulatory or legal requirements for your fixed assets.

Fixed assets management software can streamline your entire fixed assets lifecycle from planning and acquisition all the way through to disposal. It allows your business to take advantage of increased efficiencies and better utilize the resources you have to enable growth.

How Sage Fixed Assets (SFA) Can Help You

Sage Fixed Assets is fixed assets management software that integrates with your Sage installation. That means your financial data, operational data, and fixed asset calculations will all be combined in one place for easy analysis. To learn more about what Sage FA can do for your business, please click the buttons below to learn more or contact us to schedule a demo.