Managing the Challenges of Performing an Inventory

By Lawrence Kimes

Planning to do an inventory of your fixed assets? Let’s review the challenges you will likely face.

But first, even before you begin the physical inventory, consider the advantage of having a policy of standard operating procedures in place. This policy should set forth the procedures to follow when an asset initially arrives on site as well as procedures to follow in order to perform the actual inventory and reconcile the results to your database of fixed assets. This document, for example, might include instructions on how to tag the asset with a barcode label. This is because the physical inventory might proceed a little faster if the tag can consistently be expected to be found in a specified area on the asset itself such as “upper right rear.”

Now, on to the inventory. Broadly, your challenges will fall into three areas:

• Determining who will      actual perform the inventory
• Correctly identifying the      asset
• Verifying the relevant      information on the asset

Who will perform the inventory?

Some companies prefer to do the inventory with in-house resources. Help can be pulled from different departments, e.g., Information Technology, Quality Assurance, Facilities, Accounting, etc. The clear advantage to using personnel already on the payroll is their familiarization with business operations which can be very useful in identifying the assets on hand.

The disadvantage is that these people ostensibly have full-time jobs and are already loaded with major responsibilities. Is the staffing at such a point within the company that people can be pulled from their routine of normal duties in order to perform an inventory? Make no mistake. Performing an inventory can be a very time intensive project, albeit only for a while. Because of this, some companies will hire temps or contract with an outside consultant to perform the work, executing the inventory once every year or two.

Where is the asset?

Actually, this can be a big challenge, i.e., to simply locate your fixed assets.

You may want to approach this by first identifying what equipment types should or should not be included in the physical inventory.   For example, you may want to give guidance to your inventory specialists to specifically look for computers, laptops, tablets, printers, cell phones, etc.   Likewise, you may also need to identify what assets are not to be included in the inventory. For example, you may want to give guidance to skip over leased assets such as a leased copier.  But then, how will the inventory specialist know? Clear guidance about such distinctions are important and must be clearly communicated prior to the inventory.

Another issue that may arise is the tendency to overlook some assets because they may be assumed to have been expensed and therefore were not capitalized in the database of fixed assets. Assets that fall below the capitalization threshold, now called the de minimis safe harbor, may very well have been expensed. But what if the assets were aggregated onto one asset record and capitalized?   For example, suppose 10 laptop computers were ordered and put into service on one asset record. The cost of only one laptop might not rise above the de minimis level, but it might be a different story when accounting for all ten.

And finally, there is the issue of the physical location of the assets. Some might be located in a secure environment requiring special access. Other assets might be located off site and thus require travel or other logistical coordination. And what if we can’t find the asset? We don’t want to be in a hurry to delete the asset from our database. After all, it’s possible that the asset may be someplace -- just not where we thought it was.

What can be verified on the asset?

A good inventory will search for information to correctly identify the asset. This would include fields of information like:

• Description
• Equipment Type
• Make & model
• Serial number
• Old tag number(s)
• Location
• Floor and/or room
• Condition

Capturing information like this during the inventory process will help ensure an accurate reconciliation to the assets in the database. Relying only on one field of information will probably not suffice. For example, the description might be recorded differently in different databases. And the inventory specialist may even yet describe it differently. Reconciliation can thus be a challenge for some assets often requiring some degree of judgment. In order to find the correct match in some instances, the data values for several fields of information will have to be compared to what is recorded in the depreciation database. Therefore, a good software program will enable the inventory specialist to collect data on a number of descriptive fields of information deemed relevant to identifying the asset.   Our Sage Fixed Assets—Tracking is designed with that high level of functionality because it gives the inventory specialist the ability to record data for as many 12 fields in addition to the tag number. This feature in the program can be an invaluable tool when performing the reconciliation.

Whether you are conducting your inventory yourself or want to outsource it Sage is here to help with the tools and manpower for the job.  Call 800-368-2405 for more details.