Companies may spend large sums on capital expenditure and maintenance, but pay little attention to the accounting management of these investments. Did you know that poor investment management can cost you money?
We've come up with 5 tips to help you do just that. support in managing fixed assets.
- A reliable fixed assets file
- Clear, respected procedures and appropriate organization
- Get the teams involved (technical, administration, accounting...)
- An information system (not complex)
- Carry out regular fixed asset inventories
A ‘good’, reliable and up-to-date file
The basis of good fixed asset management is a ‘good’ fixed asset file. We often come across the following weaknesses in fixed asset files, which can have financial consequences (loss of earnings) for the company.
- Grouped lines: e.g. purchase of miscellaneous office furniture
- Ancillary costs not related to the main asset
- Accounting errors according to type, resulting in incorrect depreciation rates
- Errors in depreciation calculations
- Lack of documentation (vouchers) for fixed asset lines.
These practices can have harmful consequences for company management.
Tax consequences
A fixed asset file that is not properly maintained, and which includes errors in allocation, can result in a loss of revenue, particularly in terms of taxation, if there is a tax system based on these fixed assets. In Senegal, recording equipment in the fixtures and fittings accounts can have a direct impact on the calculation of the CEL VL (Contribution Economique Locale - Valeur Locative). It is therefore important to avoid accounting errors. Similarly, the correct location of the asset in the fixed assets file can help to facilitate declarations to the local authorities concerned, and avoid any adjustments in this respect.
Impact on costs (cost accounting)
If depreciation is taken into account, cost calculations may be inaccurate if fixed assets are not correctly allocated to the relevant cost center.
Impact on insurance premiums
When the fixed assets file is out of date or poorly maintained, the calculation of the insurance premium, based on the fixed assets, can be erroneous and detrimental to the company.
Impact on company value
The valuation of a company based on its assets may be under or overvalued if the fixed assets file is not up to date. This can be detrimental to the seller or misleading to the buyer. During our due-diligence missions, we have been known to express serious reservations about the fixed assets file, sometimes calling into question the vendor's declared value.
Clear and applied fixed asset management procedures
Within your company, it is essential to have clear procedures that are disseminated and applied by everyone involved. Such procedures must describe at least :
- Valuation and accounting rules
- Capitalization rules (distinction between fixed assets, inventories and expenses)
- Entry, transfer and exit procedures.
Commitment from our technical and accounting teams
For us, it's essential to have perfect collaboration between the technical and financial departments, in order to obtain information on fixed asset commissioning and scrapping. In some cases, the technical departments scrap assets without informing the accounting departments, thus overvaluing the gross value of fixed assets.
Collaboration between technical and financial departments is also important when implementing the component approach. Indeed, it will be difficult for the finance and accounting departments alone to carry out such a breakdown without the help of the technical departments. The opinion of a specialist, from those who know and use the assets concerned, is more than important.
An efficient information system
Without resorting to complex and costly software, the company must have an information system that enables it to ‘capture’ the essential information in the asset's life cycle: commissioning, transfer and retirement.
There are simple software programs, but you also need to have the information media: entry slips, transfer slips, exit slips, etc. These documents can be digitized.
Carry out regular fixed asset inventories
The Acte Uniforme relatif au Droit Comptable et Information Financière (AUDCIF) requires all companies to draw up an annual physical inventory of all their assets and liabilities, and to present a true and fair view in their financial statements.
Carrying out a complete annual inventory of fixed assets can be a cumbersome and costly exercise, especially if the above recommendations are not in place.
Some organized companies entrust us with their periodic inventory at a reduced cost, having followed our recommendations during previous inventories.
It is in fact possible to carry out rotating inventories of fixed assets (as for stocks) according to a cycle to be defined. This well-organized rotating inventory saves time during the complete inventory.
About Moore Senegal
Moore Sénégal specializes in the physical inventory of fixed assets and the implementation of a management system (procedures, software, etc.).
We have carried out many assignments in all sectors and on behalf of multinationals, SMEs and VSEs in Senegal and abroad. We have a team dedicated to this activity and have developed specific software.
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