Keeping it Simple with Solomon IV

Vol. 2003 Issue 2

Publisher: Jeff Cozens, Systematic Solutions Inc.

Email: jcozens@systematicsol.com

Web Site: http://www.systematicsol.com

(C) Systematic Solutions Inc. 2000-2003

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3. KEEPING YOUR INSURANCE AND PROPERTY TAXES LOW

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Businesses are constantly looking for ways to lower there costs and thereby make more money. As CFO’s, Controller, and Bookkeepers we too have an obligation to find ways to keep our expenses down. I suspect many of you spend a great deal of time reconciling asset balances at quarter and year end. But how many of you take the time to verify that the gross assets being reported on your financial still exist?

By not accurately accounting for these assets, you are likely to be over paying in two ways: Annual insurance replacement costs, and Annual property taxes. My corporation is guilty in this area, I must confess. I have computer hardware that was purchased back in the 1980’s which has no real value. The software which was capitalized for old products like Quatro, Word Perfect, Lotus etc have no use to use, since we have standardized on Microsoft Office. Yet these obsolete assets are costing us all extra expense for our property insurance and property taxes.

The first step is to review the fixed asset list and determine which assets are still in use. Many companies assign asset tag numbers as they capitalize assets. Others capitalize their assets based on vendor invoices. This latter approach leads to key problems like: the invoice was for multiple peaces of office furniture which are spread over several offices. This leads to the typical problem that the chairs in one office are discarded; yet all of the desks and chairs were capitalized as a single item on your asset list; and we have no quick valuation for the discarded chairs. Cleaning up your fixed assets is a long and slow process. Once you complete your reconciliation and inventory, then you can adjust your books to reflect the “obsolete and discarded” assets. You probable want to assign individual values for discrete assets, so you don’t have to deal with the writing off on 3 out of 4 chairs, like discussed above. Work with your accountants to determine how the entries should be made for reducing gross assets and accumulated depreciation. At the end, make an estimate of the expense savings which you are creating at your company. Use this analysis to promote the idea that the accounting department is creating more profit for your company!!!

Here is link to fixed asset tracking software. This list can be helpful to evaluating new tools to stay on track with your newly completed asset inventory.

http://www.cpasoftwarenews.com/tables/images/2002/fixedassets.pdf