Are There Phantoms in the Building?
You may be based in an old building, with strange creaking and weird noises, but that’s not the type of phantom I’m talking about here – though I got your attention anyway and the picture is quite funny!
No, the phantoms or ghosts I’m referring to are items listed on some form of company asset register that are physically lost, stolen, broken or obsolete, but still recorded as active.
Before I get into a bit more detail, we also need to mention “zombies”! Zombies are essentially inverse ghosts – assets that physically exist but are invisible to any form of asset management record.
Various websites quote statistics revealing that almost 30% of businesses don’t know where their assets are or who’s using them. Whilst in 70% of companies, there’s a discrepancy between the assets registered and the assets that physically exist.
Let’s think about fixed assets first. These are basically anything a business invests in for long-term use that contribute (directly or indirectly) to the overall functionality of an organisation – typically land, buildings and equipment.
- From an accounting perspective, these appear on a company’s Balance Sheet as non-current assets, meaning they represent value to the business, aren’t designed for sale or consumption, but are depreciated over time.
- However, from the point of view of a facilities manager, the type of items that fit under the “asset” category begins to expand beyond the balance sheet to include all the physical items or things (big or small) that must be maintained or managed. This can mean big-ticket items like HVAC systems, lifts and lighting or smaller yet crucial tools like mobile devices, printers and IT equipment.
Returning to our ghost or phantom assets, does their existence matter or should we just learn to live with them? Having fixed assets that are unusable or missing can create a whole host of issues and headaches. Ghost assets not only create financial accounting issues but also more haunting operability issues. Impacts can include:
- Financial – overstating asset values, over-paying on insurance costs, incorrect tax calculations and the inability to forecast and plan for capital expenditure.
- Operational – having an asset exist only on paper can lead to additional and unplanned expenses, compliance issues, decreasing productivity levels and unexpected downtime.
So, what about those zombie assets? These can include assets built within the business, items returned from customers not correctly recorded, test items received from suppliers, etc. These might seem like gifts, but the reality is different, with impacts similar to above:
- Financial – understating asset values, insufficient insurance cover, incorrect tax calculations and the inability to forecast and plan for capital expenditure.
- Operational – having an asset that isn’t recorded causes maintenance issues, compliance challenges and unnecessary replacement costs.
Ultimately, the goal is a robust Asset Management Strategy, supported by effective Asset Management Systems. We will talk about both of these in up-coming Insights.
But remember this is only a guide, so if you don’t have someone on the team that’s done this before, you need to consider sourcing experts to walk beside you. This is what TriVantage OptiMAS does!