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Fixed Asset Management – RFID Tags

November 11, 2009

 

We recently re-visited a July, 2009 article from American Chronicle (http://www.americanchronicle.com/articles/view/108068 ) and felt that it touched on some great points, but also raised the need for emphasis on additional pieces of the Fixed Asset Management (FAM) process. 

The author begins with a spot on assessment, stating that “Regardless of the effectiveness of any asset management software, they all become inefficient and unproductive without an efficient means for data collection.” The article then further explains the benefits and applications of for the most part, only Radio Frequency Identification (RFID) tags. RFIDs are a very important piece of ongoing FAM, especially for our clients that have a large amount of moveable (Fleet or Tooling) equipment. That being said, RFIDs are not always the most effective or efficient method of tracking assets, and depending on our client’s industry they may not be practical at all.  When we are working with a company that has a higher percentage of large or non-portable manufacturing equipment, we will see more of a benefit to using scannable barcode technologies. The key is to make sure that you are using the technology that is most applicable and cost effective for your client. Another important consideration is that both technologies can be used within the same environment, one complimenting the other allowing a company to use the most efficient and cost effective tag for each individual asset. One solution with which we have experience is first performing a through inventory of the fixed assets to include barcoding/tagging of every asset and then reconciling the inventory to the books of the company to ensure they are accurate. Given the cost of RFID tags, the inventory is then used to determine which assets will be assigned RFID tags and the type of RFID tag (either active or passive) to be used on an asset by asset basis.

While the type of tag is obviously an important decision for your client, the underlying necessity, regardless of the choice, is an accurate inventory of all Fixed Assets.  Even though Sarbanes-Oxely (SOX) legislation has mandated that publicly traded companies accurately account for their exact amount of owned assets, privately held companies were unaffected.  This provides a great chance for our privately owned clients to still take advantage of the opportunity on a couple of different levels.  First and foremost it is imperative for a company to have an accurate “snapshot” of their fixed assets so that the baseline can be set for the ongoing and future FAM process (regardless of technology or software choice).  Once all assets are identified, tagged (Barcode or RFID) and reconciled, disposals of old assets, acquisitions of new assets and the recording of all performed maintenance can then be streamlined and performed in the most accurate and efficient manner possible.  Secondly, most of our clients are able to recover the full cost of the inventory project through the personal property tax savings realized by the identification and disposal of nonexistent assets on their fixed asset ledger. 

Keeping track of your assets is obviously one of the most important steps to keeping your company competitive and while there are many choices for how to best go about the ongoing FAM process, it is impossible to achieve any benefit or accuracy without first having a full physical asset inventory performed.

 

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CMMS Considerations

September 29, 2009

An article titled “Lawyers and Computerized Maintenance Management Systems” by Dave Bertolini www.mt-online.com in the September, 2009 publication discussed a number of important factors related to CMMS systems. The article pertained primarily to minimizing the risk of lawsuits related to maintenance activities using the  information contained in CMMS systems. There are corrective actions that can be implemented by companies that will protect the integrity of information in CMMS systems which were addressed in the article. Two significant areas that create potential issues but with proactive initiative can be minimized are  (1) correct, consistent and accurate equipment description and (2) standardized and accurate equipment numbering to ensure  maintenance activities can be substantiated. It has been our experience that fixed asset inventories coupled with barcoding of assets has a material impact of the reliability and integrity of CMMS systems coupled with the ability to reconcile the maintenance system to the fixed asset system of the company. Too frequently, when a new CMMS is implemented, information from the old system or even is some cases, information from a manual system is imported into the new system with insufficient attention to the accuracy of the information. If the information is not accurate the problem compounds over the years bringing the reliability of the entire system into question and leaving the company at risk as it is  unable to provide the information required to verify maintenance activities occured. A detailed, physical inventory of all assets, barcoding of these assets, reconcilling all asset systems and implementing a process to maintain the system will significantly reduce risk. In addition, other tangible benefits can be derived from the process described such as reducing costs such as property tax.

Additional benefits of a managed maintenance program

August 17, 2009

Our work with clients has made us aware of the beneficial impact of a standardized maintenace program on efficiencies within a manufacturing facility and the quality of the product it produces. Whether maintenance programs use an older version of software such as MMS, a newer web based software such as EAM or an in-house program developed for the specific needs of a company, there are frequently overlooked benefits to be derived from these systems that can further reduce a company’s operating costs and increase cash flow.  Reliable Plant Magazine www.reliableplant.com in an article published on May 9, 2009 discussed the many benefits of a maintenance system implemented by Mohawk Fine Paper but only the benefits directly related to the manufacturing side of the business.

In today’s business enviornment, where cash flow is of primary importance to  business, almost every company is looking to reduce costs where ever possible. Personal property tax paid on the value of assets is a very common area where current year costs can be reduced and the benefit will continue to be realized over subsequent years.  Almost every company utilizes some form of fixed asset software to track, record and depreciate assets and relies on the information in their fixed asset system to report assets to taxing jurisdictions for property tax assessment. In reality, most fixed asset systems overstate the amounts that need to be reported on property tax returns and consequently, pay too much property tax.  Seldom if ever does the maintenance software interface with the fixed asset system and a significant portion of the excess tax paid can be attributed to the inability of the most companies to reconcile these two systems. On average, many companies are paying 5-9% to much in property tax because they are reporting nonexistent assets, because assets are replaced during the  maintenance process but the original cost and in some cases, the book value remain on the books, because exempt assets are bundled in with taxable assets and because they lack information to be able to support reporting assets in catagories with lower assessment rates.  This can be corrected if a company invests the time to perform a fixed asset inventory, incorporates bar coding of assets and reconciles the inventory information to the books of the company and to the maintenance system. Before undertaking a fixed asset inventory project, a company should evaluate if it has the time, resources and expertize to complete the inventory, reconcile the findings and implement an ongoing process to ensure fixed asset changes are reported accurately in each system and can be reconcilled to the tax returns.

Welcome to the GFTC Tax Consultant’s Point of View blog!

August 4, 2009
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This new blog is being launched in conjunction with General Financial and Tax Consulting’s new web site.  The Tax Consultant’s Point of View will contain opinions, musings, ruminations and other nuggets from GFTC tax professionals, who are some of the most experienced in the industry.

They will be offering opinions and insights on trends in the industry, new laws and regulations that can affect the tax status of corporations, and things that General Financial and Tax Consulting is doing to help companies reduce taxes, preserve cash and save money.

Welcome to the Tax Consultant’s Point of View, and of course we always welcome your comments!