by Gary Maher, Sage Partner Account Manager
October is a great month to do something about your Ghost and Zombie Assets. After all what’s scarier than a ghost and zombie other than a ghost and zombie that are stealing money from you?
Okay, well maybe they are not stealing it, but they are costing you money you don’t need to spend (or will cost you money). So what makes them this frightening?
“Ghost Assets” are those assets that are currently on your books, but are no longer in service. Think of items that have been disposed of, misplaced, lost, stolen or damaged as some of the most popular Ghost Assets that are nowhere to be found in your actual inventory. You threw that computer or phone away but “Boo” they are still on the books.
These can be quite prevalent in most organizations as the average company’s inventory is comprised of 15%-30% ghost assets. For example, if you have $2 million in depreciable fixed assets and 15% of that is ghost assets (taking the low end of the range), then you are listing $300,000 in assets that don’t exist. Again, assuming average tax rates and depreciation, these ghost assets are costing your organization more than $50,000 in tax overpayments each year! Those are expensive ghosts! Of course, eliminating them may make you feel like a superhero.
On the opposite side, are the “Zombie Assets”. A zombie asset can be found during your physical audit, however it is nowhere to be found on the fixed assets register. Tracking these zombie assets brings value back to your company and protects you from fines for under reporting (think how scary an actual audit would be in this scenario). Generally, each company has Zombie Assets equal to 12% of their inventory just walking around lifeless. Thus in the value of ghosts vs. zombies, the ghosts win but they are both hurting your organization. In fact, utilizing the industry averages it may be frightening to realize that almost 40% or more of your organization’s assets can be classified this way.
So how can you ensure you are compliance but not paying more than you owe?
Automation is the key. Spreadsheets and manual methods won’t work beyond a few assets and help create ghosts and zombies by being inefficient. Automation tools, such as Sage Fixed Assets, enable more complete and organized physical audits, which are essential to knowing which assets are where. Of course, having better ongoing methods for tracking assets as they are added or disposed of helps as well.
In short, tools such as Sage Fixed Assets are smart investments and pay for themselves rapidly, not only in saved taxes and greater efficiencies (see for yourself with this easy to use ROI calculator) but in piece of mind. Here’s another scary fact, did you know there are over 300,000 GAAP and IRS rules and regulations for depreciation calculations? Sage Fixed Assets does, and keeps up with them for you protecting you from audit horror stories.
Whatever method you choose, make sure to make this Halloween a little less frightening by eliminating the ghost and zombie assets in your organization. For more information on how Sage Fixed Assets can help – contact e2b teknologies and we can arrange for a free consultation or a free trial.
Happy zombie hunting and ghost busting!
photo courtesy of tertia van rensburg via unsplash.com