Keeping on track

With new financial regulations, examples of poor oversight and a focus on combating crime; it has become critical for companies to keep track of corporate assets.

brainstorm Keeping on trackBy Candice Jones – Copyright Brainstorm & AccTech Systems.
Photo credit: Suzanne Gell, Mariette Landman

With new financial regulations, examples of poor oversight and a focus on combating crime; it has become critical for companies to keep track of corporate assets.

While many companies are being compelled to provide more accurate accounts of their assets for various reasons, there are still far too many that don’t employ a sound enterprise asset management (EAM) solution.

AccTech director, Andre Cloete says there is no more compelling case for EAM than a perfectly mundane and yet telling example. Most people in SA own a car, and most car owners have negotiated an insurance package on their car.

“If you do not have your insurance package evaluated once every six months, you will pay the same amount that you paid when you first negotiated your insurance package,” he says. “What you have to remember is that asset depreciates and will be worth less a year from now. Your insurance should also be a smaller amount, since the car has a smaller value.”

This example could save the average driver well close to R300 a month on what they spend in insurance. “If you can save that much tracking your asset, imagine what a multi-million rand company with thousands of assets can save if they track their assets accurately.”

With competitive pressures forcing organisations to minimise costs and with downtime becoming increasingly expensive, EAM suddenly becomes an ideal solution.

Netting and assets value

AccTech has 14 years of experience designing, implementing and supporting Enterprise Asset Management Systems. The company has come to understand several truths about tracking assets.

One such truth is that financial reporting is changing in many ways. Cloete explains that the old financial reporting method known as Generally Accepted Accounting Principles or ‘GAAP’ is now being aligned with the international reporting practice known as IFRS (International Financial Reporting Standard).

As part of the old system, assets were given a value in a chain, which would depreciate over time. Companies would then report an asset as having a nil depreciation value when the asset reached that point in the scale, even though it was still in use. IFRS has refocused this approach.

Under the new legislation, companies are now expected to report all assets that are still being used by the company, even if the depreciation value has reached zero. AccTech’s solution has created a method for companies to report accurately what value nil depreciation assets have, without having to scramble for that information.

Risky business

Cloete says the complexities of IFRS allow companies to interpret rules and implement then in many ways. AccTech has analysed various industries and businesses within those industries to assess how they implement IFRS in their reporting processes.

Having done that, AccTech has developed an EAM solution that allows for an all encompassing platform, which is intended to address the asset tracking methods used by a variety of businesses and verticals.

Although IFRS makes space for a variety of transaction types and processes, Cloete says that approaching the development in an all encompassing manner has been key to delivering EAM solutions.

While Cloete admits this is an uncommon approach to building the solution, he says that there are guidelines that need to be followed and borders that can’t be crossed. “If you stick to those outlines, then the rest of the solution will fall into place.”

No hide-and-seek

Another governance issue that EAM tackles is the Sarbanes-Oxley Act of 2002. Cloete says the aim of the legislation is to ensure that business processes are reliable and that key managers are accountable.

AccTech’s EAM solution is specifically designed to take accountability into consideration. “Companies used to rely on auditors to manage the end of year asset tracking process, which is in itself a risk to the business. Capable management and good tracking creates a stronger sense of control over assets, which in turn alleviates that risk.”

“Control over assets might only be the starting point of EAM, but it is one of the most important aspects of EAM. How can someone make business decisions around an asset if they don’t know where that asset is?”

Wants and needs

Ensuring assets are accurately tracked within a company requires an all important design feature: usability. Nevertheless, Cloete notes this feature is often overlooked.

“Our solutions are designed to be user-friendly. It is not good to have a solution that no one can understand.” Cloete says people have to be comfortable using a system before they will want to use it for its intended purpose.

The company has a solution for every business type, from the SME, which will only need a simple tracker, to a full scale solution where thousands of assets will need to be logged and traced.

Assetware Manager is the large scale solution and traces assets from procurement, right the way through its financial lifecycle. The solution is built on an open source platform, can integrate with most accounting packages.

EAM is the silent manager of a company’s assets, allowing them to compete in highly competitive environments, at lower cost. Given today’s economic climate, an EAM solution is a worthwhile investment.