An inventory check of your company’s physical assets uncovers anHuber. accounting black hole. Hundreds of computers are missing from the Hertford office and the company car fleet is bigger than expected. The mistakes are large enough to make the company’s balance sheet for the financial year look increasingly precarious – along with your job as system accountant.
‘Black-hole’ scenarios such as this have made asset management a flourishing area. Computerising asset registers not only improves recordkeeping, it can also automate mundane but essential tasks such as depreciation calculations. According to Hardcat managing director Neil Copland, a typical user of specialist software can expect a minimum 20% reduction in business-asset running costs.
One reason for the proliferation of specialist fixed-asset software, according to Stephen Moriarty, managing director of St Albans-based software house Catsoft, is the steady rise of office PCs and related hardware.
He explains that, although a PC is a single asset, the processor, hard disk and screen may have been acquired at different times, increasing the complexity of the financial manager’s responsibility to track their values.
‘Our software lets you know what you have and what it’s worth,’ says Moriarty, who boasts clients such as KPMG and British Gas. ‘Do your assets need replacing or have they been stolen? If so, are you paying too much insurance?’
Asset-management software addresses the twilight zone that exists between finance departments and facilities managers, says Moriarty. For finance departments, the fixed-asset register is the font of all knowledge about assets owned by the company, including PCs. As well as financial information such as price and depreciation, the fixed-assets register might also hold information such as configuration and supplier details. Whenever a PC or other asset is bought, upgraded, moved or disposed of, the register will be updated to reflect the change.
IT and facilities managers require more detailed information – how many PCs there are in the organisation, which are networked, what software is in use, as well as information that will help them keep track of changes and upgrades to ensure software is properly licensed. Often, this information will bear an uncanny resemblance to the information held on the fixed-assets register.
Specialist suppliers like Catsoft, Hardcat and Britannia have exploited the demand for software that can satisfy both camps. While they have found a fruitful niche, they face competition from some of the big names in IT – enterprise resource planning suppliers such as SAP, Oracle, Walker and PeopleSoft.
Most ERP vendors provide asset-management modules that integrate with their enterprise-wide financial systems and can do everything from electronic bar coding to projecting depreciation costs.
The challenge for anyone seeking an asset-management solution is to find a product that matches the organisation’s needs – ranging from the home-built spreadsheet to the ‘best-of-breed’ or integrated ERP options.
‘If you already have an ERP package, it’s logical to add a fixed-asset module to the system from the same company. But I doubt whether it’s worth investing in a complete ERP package just for its fixed-asset system,’ says Mark Holland, an IT consultant with accountant Kidsons Impey.
But picking a specialist asset-management package can add complexity to your IT system, he warns. ‘The more suppliers you have, the greater the potential for something to go wrong,’ he argues. ‘If things go pear-shaped, who will you blame?’
In spite of the potential support headaches, Holland judges the best-of-breed camp to be ‘slightly on top at the moment’, while stressing that no side has won the marketing war yet.
Hardcat’s Copland argues that large accountancy packages do not give a detailed overview of fixed assets: ‘Our asset-management system keeps track of purchase details, the models and locations. Accountancy packages only give a list of assets and where they are.’
Most people who opt for a specialist system, such as Hardcat’s client/server software, can usually link to general ledger systems through common databases such as Sybase or Microsoft’s SQL Server.
Mark Johnson, marketing manager of London-based Britannia Software, goes further. Rather than putting the argument in terms of integrated or best of breed, he suggests products should be differentiated by who they are designed for.
His company’s products, he insists, ‘cover all the accounting functions while other companies just record information in an inventory’.
‘Womb to tomb’ accounting
With some 1,500 users in medium to large-sized companies, Britannia’s Fixed Asset Management Solution range extends from purchase ordering to include depreciation accounting, reliefs, transfers, splits and disposals – the ‘womb to tomb’ life cycle, as Johnson puts it.
According to Kidsons consultant Holland, specialist asset-management systems are most useful to companies with turnovers exceeding #50m. But, he says, it is hard to define exactly what size a company needs to be for niche software to become cost-effective. ‘For companies with a turnover of less than #50m, it all depends on how asset management-intensive the business is. If you’re selling aircraft, it won’t take many sales to reach your sales target,’ says Holland.
Enterprise or specialist?
Sabby Gill, a sales consultant for PeopleSoft’s ERP products, puts some of the arguments for integrated software. Enterprise software, he suggests, may not match all functions offered by specialist packages, but has more to offer the large, multidivision organisation that may be operating in several countries.
‘Our clients need software which can meet local reporting requirements, so our asset-management module has to handle multicurrency processing.
It also means a company can keep a physical inventory of all its transfers between subsidiaries,’ he explains.
According to Gill, one of the myriad effects of economic and monetary union will be a shake-up in the asset-management software industry.
‘Under statutory reporting requirements in the euro zone, you are required to restate calculations in the euro. For UK companies, this will mean recalculating all depreciation costs from the pound to the euro – the nightmare scenario.’
Gill adds: ‘I know a lot of single and dual-currency asset-management systems, but many of them can’t handle the multiple currency concept.’
At the other end of the scale, however, many small and medium-sized companies have found alternatives to commercial software packages. One of the most common asset-register tools is a simple spreadsheet; some companies will adapt modules in their financial accounting systems.
These DIY packages can work well on relatively simple calculations for small businesses, but the problems kick in as the quantity of data mushrooms, says Catsoft’s Moriarty.
‘If a company is located across a number of sites, then assets may belong to a number of departments and so may have to be grouped into a number of categories,’ explains Moriarty. ‘This complex hierarchical structure is virtually impossible to model on any spreadsheet-based system, no matter how sophisticated it is.’
This view is supported by Hardcat’s Holland: ‘Spreadsheets have inherent limitations. If your program is handling complex sums, you are more likely to make mistakes in the formulas or to miss the bottom row off a table. If you’re not careful, all you’ll be left with are pretty charts.’
Catsoft, meanwhile, has made its peace with the spreadsheet by offering a data import model to bring data in and out of packages such as Excel to its core product AssetPro. The PC-based package assigns a code to each asset. Each item can be categorised, for example, by type and department, and is linked to a depreciation forecast.
As assets are sold or transferred within the organisation, the program retains a complete audit trail.
Out on the front line of facilities management, the most popular labour-saving device is the bar-code reader. When equipment such as PCs are registered in a package such as Catsoft’s AssetAuditor, the program produces a unique bar-code label.
Label scanning cuts down time
Rather than taking weeks ticking off items on a clip-board and keying in the data to an asset register, the facilities team can use a hand-held scanner to read the labels and collect the data electronically.
The information is then downloaded directly into the audit program.
According to Moriarty: ‘Scanning bar codes quarterly improves security, especially for IT equipment like PCs that can be easily moved.’
The security, management and cost-savings arguments for computer-aided asset management are compelling; the more efficient a company’s accounts, auditing and asset systems, the less money it will waste.
But Kidsons’ Holland sounds a note of caution. Clients have a long history of ignoring labour-saving goodies from the computer industry, particularly if they address a task that is not always seen as a core competitive function.
In the main, the small and medium-sized companies he advises remain to be convinced that their asset register needs the attention of a #1,200-plus specialist software package and associated support and staffing costs.
‘Asset-management software is not widely used by our clients,’ says Holland.
‘Some owner-managers still have a suck-it-and-see approach to new technology.’
CASE STUDY: FINANCIAL SERVICES
With its high reliance on IT and other office equipment, the financial-services sector is one of the most enthusiastic markets for asset-management systems.
Until September 1997, the Royal Bank of Canada’s London office used an in-house fixed asset-management system based on a Paradox database. But when the person who wrote the system retired, it became too expensive to run.
‘It was an old, antiquated system and we wanted something more user-friendly,’ explains John Pelley, a financial analyst at the Royal Bank of Canada in charge of maintaining fixed-asset costs and depreciation each month.
The bank chose Catsoft’s AssetPro for Windows and integrated this into its local area network serving around 700 employees.
The fixed-asset software records everything the bank purchases, from company cars to mainframe computers.
Pelley admits the installation of the new system brought teething problems.
‘When we transferred our records to Catsoft’s product, the system would sometimes stop, or it would be painfully slow to input the data; on some occasions, it took up to four hours.’
After sending its database of records off to Catsoft, however, the problem was discovered to be a couple of faulty records on the bank’s old system.
Since these bugs were corrected, the system has speeded up.
Pelley says the benefits from shifting to the new system will not be immediate.
‘You have to adjust to a new system but, as long as the system’s timing is okay, you don’t really worry about improvements.’
At the beginning of 1998, Cornhill Insurance decided to conduct an equipment audit to compile a database showing which of its IT systems were year-2000 compliant. To help carry out the project, the insurer adopted Hardcat’s bar-coding software.
The audit process involved tracking around 9,000 IT systems at Cornhill sites across the UK. This information guided facilities managers on which items needed to be upgraded or replaced. Each piece of technology is tagged with a bar code, which, when swiped by a bar-code reader, is registered in Hardcat. The information is then available via the company’s mainframe computer systems.
Denise Gill, senior administrator in Cornhill’s head-office finance department, is responsible for updating the fixed-assets register every month. ‘Each month, I add on the purchases and take off the disposals. Then, at the press of a button, it calculates the monthly disposals,’ she says.
‘It’s an improvement on the old system because I can run it myself and also customise my own reports.’
The majority of assets are IT-related and can be broken down into categories such as laptops, PCs or printers.
Gill said it was too soon to establish whether the system had brought in cost savings.
CASE STUDY: THE AUTOMOBILE ASSOCIATION
The Automobile Association has around 40,000 assets that it needs to service its nine million members. The association used to outsource its fixed-asset data-entry function and process the information on its mainframe computer.
Barry Pullen, then head of fixed-asset accounting, recalls how many problems the IT solution raised: ‘Asset information was not accessible until the completion of the month and entry cycles.
‘The system was also inflexible and couldn’t produce the different report formats needed for financial and management accounts. I soon realised that fixed-asset accounting was more than just crunching numbers.’
Pullen wanted a more sophisticated asset-software package capable of providing information for forecasts and strategic business plans.
The AA opted for Britannia Software’s Fixed Asset Management system.
‘It was the most flexible system because it had an integrated reporting facility with output to spreadsheet files,’ he says.
The system was originally based on a file server but now runs on a Pentium processor server. The DOS-based package manages around 40,000 assets, including patrol vehicles and computer equipment, plus 80,000 associated asset records, such as transfer and disposal events.
The asset-management package is divided into two core elements: asset maintenance and asset reporting. The single-entry asset screen splits into four sections. The first holds ownership details and the second asset information, like models and serial numbers.
The third section relates to the asset’s history and the fourth handles depreciation.
The AA has asked Britannia to modify the system to match specific business needs, explains Pullen. ‘The system was customised to allow permanent cross-referencing, so when an asset is transferred to a different cost centre, the related business and service codes are altered.
‘Sometimes we request a bespoke modification which Britannia develops for the core system. It generally does this free of charge for the next release.’
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