The true benefits of conducting physical audits for Finance Directors/Managers

In order to have better control over the recognition of the theft of your asset base, the shrinkage of your assets, deterioration of your asset base and the misuse of assets, you must conduct a physical audit.  Verifying what an organisation owns and the whereabouts is essential for complying with requirements such as IFRS and Sarbanes-Oxley (SOX). In addition to regulatory compliance, effective asset management can also help to ensure assets are insured at the correct level, to budget for maintenance and help to avoid unexpected asset ‘write offs’.

The practice of conducting periodic physical audits is the key to better managing an asset register. Physical audits are essential to clean up variances between what is being financially accounted for on the asset register and what is actually present. Whether the assets are maintained on a spreadsheet or on a specialist fixed asset system, the credibility of an organisation’s data and (the existence of assets and their Net Book Values) will be in question if it cannot verify them. 

A low cost physical audit can be easily conducted whereby barcode labels are attached to assets and a barcode scanning device used to scan the assets and inventory items. A hand-held unit uses an interactive display to guide the user through the audit process, continually updating the status of audited and unaudited items on-screen. By using a barcode scanning device such as the (Motorola MC55) and tracking software such as (Track4000) an audit can be completed in 80% less time than if manually completed by pen and paper.

In addition to time savings, the other benefits of using a scanner include better accuracy and the efficient updating of data. The use of barcodes can provide a much more accurate audit because they remove the inherent human error of incorrectly identifying assets. With the scanner, there is a confirmed electronic trail of items that have been scanned.

The data on the asset register will also be an accurate portrayal of what should be reconciled when producing an audit trail and will assist with meeting the financial reporting standards of IFRS and Sarbanes-Oxley (SOX). Lastly, it enables anyone to conduct the audit since the auditor is only scanning barcodes and does not require specialist knowledge to distinguish between different items that need verifying. 

By implementing a professional tracking and barcoding system, you will be able to maintain tighter control and management of your fixed asset register and ultimately reduce the time and money spent managing your asset base.