How To Perform Verification of Fixed Assets for Enterprises

May 30, 2024

Ensuring the accuracy and integrity of fixed asset records is essential for enterprises to maintain financial transparency and regulatory compliance.

In this guide on performing verification for fixed assets, we delve into the process to provide a comprehensive roadmap for enterprises and financial institutions.

By mastering the art of fixed asset verification, enterprises can safeguard against misstatements, identify potential discrepancies, and optimize asset management practices.

Main Takeaways From This Article:

Understanding fixed assets is vital for maintaining correct financial reporting and enhancing asset tracking procedures, thereby ensuring financial and operational efficiency for businesses and financial institutions.
Companies should aim for continuous learning and adaptation, implementing innovative methods such as the use of asset management software.
A precise step-by-step guide for fixed asset verification can be a powerful tool for companies to ensure improved asset tracking and precise financial reports.
Identifying and effectively addressing the challenges that arise during the verification process early on is key to ensuring a hassle-free verification process.
RedBeam's superior asset management software can revolutionize your digital asset verification process by streamlining and simplifying it, thereby making it more trustworthy and user-friendly for your company.

What Are Fixed Assets?

Fixed assets, also known as tangible assets or property, plant, and equipment (PP&E), are long-term assets that a company intends to use in its operations for more than a year. These consist of both depreciable assets, like buildings, machinery, and vehicles, and non-depreciable assets, such as land. Fixed assets play a pivotal role in a business's operation as they are essential to the production of goods and services or in the maintenance of business processes or infrastructure.

What Is the Verification of Assets?

Physical asset verification involves systematically inspecting tangible assets like machinery, buildings, or equipment to ensure their physical presence corresponds with recorded data. It is a crucial, routine practice of corroborating the existence, location, and ownership of a company's fixed assets.

This process includes understanding physical and digital asset verification, their condition, and their value. It's an essential part of precise financial reporting, internal controls, investment decisions, and mortgage payments.

Advantages of Fixed Asset Verification

Conducting regular digital asset verification offers several significant benefits that can make the process invaluable for growing businesses.

From enhancing the accuracy of financial reports to boosting the efficacy of asset-tracking initiatives, such as tracking your mortgage application process with the mortgage lender, to cash deposits, fixed digital asset verification provides an array of merits.

Let's look at some of these key advantages:

Financial Accuracy: Regular verification of fixed asset ownership supports clarity and accuracy in your financial reporting, current savings account statements, bank account, and bank statements, shielding you from costly errors and ensuring the diligence of balance sheet reconstructions.
Optimize Utilization: Keeping track of your liquid assets and non-liquid assets allows you to see what's over or underused. This can help you direct resources more efficiently to save on unnecessary investments and have accuracy over bank statements and your income verification.
Audit Preparedness: Regular audits can take you by surprise, but with continuous asset verification, you'll always be ready for an auditor's unexpected visit with the help of asset management and organized records of your bank account.
Avoid Any Unforeseen Financial Issue: Regular digital asset verification helps to flag inconsistencies in bank account transactions and liquid assets, deterring fraudulent activities and identifying them promptly when they occur.
Repair and Replacement Planning: This process permits you to identify when your assets need attention or replacement, facilitating an effective maintenance strategy and preventing unexpected costs.

The Step-By-Step Asset Verification Process

Now that you have a basic understanding of fixed asset verification let's delve into the step-by-step process of verifying fixed assets to enhance the accuracy of financial reporting and asset management.

1. Creating a Comprehensive Asset Register

Creating a comprehensive fixed asset register is a crucial step in asset verification. A detailed assets list paves the way for accuracy and transparency in the verification process. So, how do we go about this? Here are some insightful tips to guide you:

Start With a Catalog: Create a catalog of all assets. Include crucial information like acquisition date, location, condition, and estimated value.
Asset Categories: Categorize assets based on their nature and function. This allows for easier identification and tracking.
Implement Asset Tagging: Utilize barcode or RFID tags to monitor each asset. This simplifies future updating and scanning procedures.
Digitization and Software Support: Consider going digital using management software like RedBeam. It can automate the process and contribute to a more accurate register.

2. Planning and Scheduling the Verification

This important part of the process can impact the accuracy of the audit; that said, thoughtful scheduling can save you time and avoid any unnecessary confusion or disruptions to your business operations.

Here are tips to help you get started:

Schedule in Quiet Periods: Identify times when your organization’s operations are relatively calm or slow, such as after quarter-end, to carry out the verification process. This minimizes disruption and allows you more freedom to update your asset records accurately.
Divide the Task: Break the task down into sections and arrange them in an order that suits your company’s circumstances. Doing so makes the task manageable and can increase efficiency.
Assign Responsibilities: Clearly define who will be responsible for which assets. Streamlined responsibilities reduce overlap and help ensure that every asset is accounted for.
Communication: Engage with staff within your enterprise to inform them about the importance of the verification process and what it entails. This increases cooperation and aids in a smooth verification process.

3. Executing Physical Verification

Although seemingly daunting, we have simplified this process for you with our list of key fundamentals and best practices:

Inspect the Location: Begin your verification by visually inspecting the location of your assets. This helps to affirm that all items are securely housed in their intended locations.
Examine the Condition: It's crucial to assess the condition of each asset. This way, you can identify any derivatives and record maintenance needs for future reference.
Count the Quantity: Whether it's a single item or a batch, count the quantity of each asset. This cross-checks your records against the actual situation on the ground.
Match Asset Details: Match the actual asset details to your records. These may include serial numbers, descriptions, and other unique identifiers. Doing this ensures proper identity and can save your organization from potential fraud or misplacement.
Utilize Technology: Where applicable, use technology to capture all necessary data. Barcode scanning, QR codes, and RFID technologies can simplify this process and reduce human error.

4. Documenting and Reconciling Findings

It's about comparing your physical count with the data in your asset register. This step is crucial for uncovering discrepancies, identifying lost assets, and detecting theft.

Here are some tips to get started:

Recording Findings: Accurately document all findings from the physical verification process. This includes recording the current condition of assets and their current location.
Identifying Discrepancies: Compare the actual physical count with your asset register. Any mismatches or inconsistencies should be carefully noted for further investigation.
Resolving Errors: Determine the reasons for any discrepancies found in the records. They could be due to misplaced assets, unrecorded purchases or disposals, or even theft.
Making Adjustments: Adjust the asset register based on your findings during the verification process. This could include updating asset location, condition, or quantity as necessary.

5. Updating and Correcting Asset Records

Ensuring that your ledger reflects the actual state of your assets is crucial for maintaining accuracy in your financial records. Here's an overview of how you can manage this process:

Reviewing Verification Observations: Start by revisiting the findings from your physical verification. Look closely at any discrepancies, noting down which assets were found to be missing, in different locations, or in a different condition than recorded.
Adjusting Records: After understanding the differences, address them systematically. Update each record individually, ensuring the changes accurately reflect the physical state of the asset. Remember to adjust both asset descriptions and their associated values.
Investigating Unresolved Issues: If you cannot explain discrepancies, investigate. This might involve consulting relevant personnel, checking CCTV footage, or examining transaction records.
Documenting Changes: It's important not just to make the changes but also to document the reasons for said changes. Should an audit become necessary, this documentation will be invaluable.

6. Reporting and Analyzing Verification Results

The purpose of this final step is not just to come to a closure but also to derive business insights from the verification results. Here's how to accomplish this task effectively:

Analyze Verification Results: Once the data is reconciled and updated, delve into it with an analytical lens. Look for patterns, discrepancies, and irregularities that could indicate errors or dishonesty. This action can offer a closer view of your assets' health.
Prepare a Detailed Report: After analysis, a detailed report on asset verification should be prepared. This report should show the difference in book value and physical value of assets, missed assets, if any, or any extra assets found during the process.
Communicate With Relevant Stakeholders: Don't let your findings stay on paper. Communicate these insights to all relevant teams and departments to ensure discrepancies are remedied, and future verifications are more efficient.
Decision Making: Use your insights to contribute to strategic decision-making within the organization. These decisions could be about asset management, maintenance schedules, resource allocation, and more.
Continual Improvement: Your analysis and reporting are not just for one time. They should be used to continuously improve the asset management system, making every subsequent asset verification more efficient than the last.

Asset Verification Challenges

While the importance of asset verification cannot be overstated, businesses often face several challenges in implementing and maintaining this process actively. Understand what these challenges are below:

Time and Resources: Asset verification can be a time-consuming and resource-intensive process, especially for large enterprises with numerous assets. It involves multiple steps, from planning and execution to documentation and reconciliation, each requiring significant attention and care.
Asset Accessibility: Physical verification of the assets may pose a challenge due to limited accessibility, especially for assets distributed across multiple locations or those in use during the verification process.
Data Accuracy: Ensuring complete and accurate collection of asset data can be challenging. This includes maintaining accuracy during data entry, ensuring consistent data capture standards, and minimizing human error.
Complications: These arise due to the diversity of assets, as different assets have different verification requirements. For example, real estate property needs a different verification approach compared to office equipment.
Change Management: Assets are not static; they may be added, moved, used, maintained, or retired. Keeping up-to-date with these changes and maintaining accurate records pose a significant challenge in asset verification.

The Role of Asset Management Software

Keeping track of multiple assets can be a challenging task, particularly for large enterprises with vast inventory lists. This is where the role of asset management software comes into play. It's a highly efficient tool that aids in maintaining accurate record-keeping and ensuring smooth business operations.

Let's understand why this software is a game-changer for asset verification:

Efficiency: This software automates various tasks, which can save time and reduce human error. This ensures swift and accurate asset verification.
Data Precision: This software collects and preserves data systematically. It helps in providing precise values during fixed asset verification, minimizing discrepancies or inconsistencies.
Scalability: Regardless of the size of your enterprise or the quantity of your assets, a good asset management tool scales to your needs. It can easily handle all your verification processes, offering a scalable and flexible solution.
Streamlined Workflow: It helps establish a centralized system for tracking assets' life cycles - from procurement to disposal. This streamlines the workflow and enhances the accuracy of data during verification.
Compliance and Reporting: This software ensures compliance with financial regulations related to asset management. Additionally, the built-in reporting feature provides useful insights, supporting informed decision-making.

Elevate Your Verification Strategy with RedBeam

Asset verification is a critical process that enterprises should never overlook. Regular, accurate verification gives a clear picture of a company's valuable assets and, thus, informs strategic financial decisions. Take your asset verification to new heights with RedBeam's asset tracking software. It's a tool designed to simplify asset-tracking processes and ensure accuracy.

Are you ready to streamline your asset verification process? Schedule a demo with RedBeam and experience the difference!

FAQs

What Is the Purpose of Verification of Assets?

Asset verification confirms the existence, ownership, and value of a company's fixed assets. It also detects any inaccuracies in the asset registry, ensuring accurate financial reports and efficient asset management.

How Do You Provide Proof of Assets?

To prove assets, you'll generally need to provide financial documents such as purchase invoices, lease agreements, or maintenance records. One of the most efficient ways is to use a comprehensive asset register that can be accurately and frequently updated using asset management tools like RedBeam.

How Long Does Asset Verification Take?

The duration of asset verification varies depending on the size and complexity of your enterprise. For smaller businesses, it could take a few days. However, larger organizations with extensive fixed asset inventories may require several weeks or even months to complete a comprehensive audit.