Ghost Assets: How Your Business Is Leaking Money

Should you be hiring Derek Acorah to be doing your fixed asset accounting?Is the most important piece of equipment for inventory management a Ouija board rather than an RFID system? Provided you are a professional with years of experience and access to the latest software-driven inventory management systems you can readily determine the value of assets that you can locate and inspect. The key word or phrase here though is "locate."

Asset tracking is probably a mixture of art, science and skill, but all too often, without access to the nether world, it can be difficult (if not downright impossible) to find assets that are listed on a property ledger. These are "ghost assets" on the books supposedly under the control of the company, but they appear to have "vanished".They leave only a trace on the ledger with no material essence on this physical plane of existence! That may sound light-hearted, but in some cases when eventually a rigorous fixed asset accounting audit is conducted, "ghost assets" can form as much as 15% of a firm's total property, plant and equipment inventory.

More worryingly, the existence of these "ghost assets" suggests to an auditor that you don't have adequate asset management software or procedures in place and therefore really have no way of identifying the accuracy of the fixed asset ledger.If that's so, the auditor may then naturally conclude that all of your internal controls are not functioning correctly and you'll suffer all the business and financial consequences that follow.Taking a physical inventory of assets is a major effort, which is probably why companies keep postponing it, but once this job is complete, the books equal the real assets and you know you have a sound system in place to maintain the records.Only then can you guarantee to senior management and the auditors that all internal controls are functioning properly without the need for a trance or consulting a medium!

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