Key challenges in managing FA process
As organizations grow in scale they need a more detailed justification of capital expenditure. This leads to many functions getting involved in the fixed asset management process with significant “hand-offs” at each step/stage. In this chapter, we will address a broad array of issues involved in the process of fixed assets in any large scale organization.
For large organizations, the simple traditional approaches cannot deliver a robust fixed management process because with scale increased the quantum of expenditure which involves substantial exposure to risk. For most organizations it a strategic and complicated process that involves participation from cross-disciplinary teams (including the requisitioning team, sales, engineering, manufacturing, marketing, information technology department, supply chain, buy to pay team, accounting team and various tax departments, etc.) and carries a high degree of inherent uncertainty.
Given below are some challenges inherent in a typically fixed assets management process:
- Multiple organization structures for fixed assets
- Shared Services in various locations, centralized within the biz, and standalone at sites
- Numerous IT platforms used for fixed asset register ranging from advanced ERPs to local systems including Excel
- Lack of standard data attributes/definitions relevant to capturing fixed assets across organization spanning multiple departments and teams
- Complexities to have multiple representations for the same set of fixed assets for other purposes like STAT, Tax, etc.
- Complexity due to country-specific tax (US & Non-US), statutory, and VAT/GST requirements
- Multiple systems may result in extraction/interface challenges
- Need for expertise and discipline across business units to account for both US GAAP and local GAAP requirements
- Limited central or regional SMEs consultation, Limited communication between tax and stat experts with the FA accounting
- Best practices not leveraged across businesses
- Limited/inconsistent policies, standard operating procedures, process documentation and training
- Asset data is duplicated across several systems
- Data held on one system is not made available to other systems
- Reports are drawn from various sources and are inconsistent
- No systemized verification exercises having taken place since long
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