Optimizing the Asset Life Cycle Entry 7 – Why Timing Matters

Simply put, timing is everything.  Clearly, as it relates to availability of information, decision-making can be impacted by availability of information needed to make a decision. In our last blog entry, we left off by discussing the timing of accounts payable being aware of the receipt of an incoming order.

A delay here can trickle downstream, impacting payment to vendors and updates to other financial records, such as the fixed asset register.

Timing impacts the coordination of linking disparate records to physical assets.

A typical tracking mechanism utilized by many companies is to physically affix a bar coded asset label containing a unique number (commonly referred to as an asset tag) to assets.

There are two issues here:

  1. Who affixes the tag and when
  2. How and when does this information get processed into logical records such as a FAR

Consider that shipping and receiving does not open boxes for incoming orders, therefore shipping is unable to affix the asset tag. This might mean that the recipient (end user) of the asset would have to do so.

This is obviously very unreliable and erodes the ability to control this act (i.e. eliminating an important control point). Next, how and when does the asset tag number get recorded into a logical record that represents an asset?

If the number is recorded prior to the tag being affixed to an asset, there is a significant risk that either; the tag won’t get affixed, or will get, but to the wrong asset.

This is one of the major reasons reconciliation between a physical inventory count and a fixed asset register fail. Without a means to link the logical record to the physical asset, finance will likely need to follow a paper trail to reconcile their records, or worse yet, result in a write down of the fixed asset register entry (and its associated value).

Our next blog entry we will explore methods to resolve these sorts of problems…