Tools of the trade
The term fixed assets has become a misnomer in an age of portable high-tech equipment. But those wandering assets still need to be accounted for
You get out of the taxi and stagger into the hotel lobby, lugging your laptop and luggage. It's 11 p.m., and you hope your guaranteed room is still available. Your sales team has already arrived for the big customer meeting tomorrow. In all, your company has some eight personal computers, a fax machine, a liquid-crystal-display projector, and a new digital camera floating around the hotel somewhere. Across the country, another sales team is carrying similar equipment into another hotel. You suddenly realize that the computer equipment your business has on the road represents about 10% of your company's total assets!
Fixed assets aren't as nailed down as they used to be. In fact, the complexity of fixed assets--defined as tangible property with a useful life that exceeds a year--has increased exponentially with the advent of high technology. In the 1980s most small companies' fixed assets included furniture, a copier (if it wasn't leased), perhaps a few vehicles, and a PBX phone system. High-tech equipment constituted a small fraction of the fixed-asset ledger and was rarely even inventoried.
Today furniture and vehicles are small potatoes compared with networks of PCs, servers, scanners, printers, and the like. For most company owners, one briefcase filled with the CPU chips of all the office computers would be worth far more than all the office furniture.
Unlike low-tech assets, such as desks and filing cabinets, high-tech assets are defined by bewildering terminology that changes rapidly, and their useful lives often prove to be shorter than the accountant's depreciation schedule. That means companies have a tendency to overstate the value of high-tech assets on their balance sheets. Does your company still have 486 PCs on its books? If so, you can look forward to an asset write-down that hits your bottom line in the not-too-distant future.
And that's not the only complication we confront in managing fixed assets as we shift from heavy desks to portable high-tech equipment. We also have the problem of tracking. High-tech assets are swapped, combined with other components, used at home, and frequently junked for the latest version. It's virtually impossible to keep all the necessary information up-to-date on paper and filed neatly away in a drawer. Yet consistent tracking of high-tech fixed assets can yield a number of important benefits and put real dollars on your bottom line.
* You'll know where those valuable assets are. How often has an employee left the company only to be drawn into a controversy about what he or she has stashed at home? ("Oh, that laptop. The sales team borrowed it months ago.")
* You can better estimate the residual value of your equipment. Remember, a $4,000 desktop PC purchased four years ago is probably worth less than $100 today.
* You can predict replacement cycles with more accuracy and develop a systematic plan for asset reinvestment. Unlike furniture that can be used for decades, long after the depreciation schedule has ended, high-tech assets must be replaced constantly just to maintain your level of capability. In a sense, it takes a lot of running to stay in the same place. All too often, companies fall behind technologically (and, thus, in their operations) because they have misjudged the replacement cycle of a critical information system.
* You can analyze what you have. Most managers have no idea what is really deployed in the field. For future purchases, for example, it's helpful to know which assets are heavily used and which ones sit in a dark corner somewhere. Did those expensive projectors you purchased for the sales team two years ago really result in higher unit orders? What percentage of your installed base of PCs can run Windows 98? How many service reps working out of their homes have high-speed modems?
So how do you do all that? Luckily, high tech can come to the aid of high-tech assets. What you need is a database application--a specialized type of software program that can log everything, keep it organized in useful categories, print out helpful reports, and turn your company into an outstanding example of thoughtful fixed-asset management.
Some commercial accounting-software packages are good at tracking fixed assets. Many, however, can't handle the complexities that high-tech assets bring. If you don't have suitable off-the-shelf software but do have someone in your company with information-systems expertise, it's relatively easy to build a fixed-assets application using a database package like Microsoft's Access.
Eric Kriss is CEO of Workmode Inc., which provides Web-site construction and management services to growing companies. He was formerly the CEO of MediVision and MediQual, both Inc. 500 companies.