Whether you work in an auto shop, a dental clinic, or an elementary school, your business or organization owns physical assets—investments that you can touch, feel, and see. Conducting an asset audit can help you keep tabs on these investments, whether they’re equipment, machinery, technology, or something else.
In this article, we’ll reveal how to conduct an asset audit. If performed correctly, the fixed asset audit process will help keep your business organized, productive, and profitable—all while making your accounting processes significantly more efficient.
What is an asset audit?
An asset audit occurs when a company physically accounts for all the organization’s assets. Ideally, this asset checklist is generated from a company asset management system.
During the asset audit process, auditors will verify the location, condition, and details of every asset the company owns. During an internal asset audit, this count is conducted by trained employees. And during an external asset audit, an outside organization locates, counts, and validates the company’s assets.
The purpose of an asset audit is to verify the accuracy of a business’s asset list. Since these assets are listed on everything from corporate tax returns to balance sheets, the integrity and completeness of an asset audit are critical. This is especially true if outside investors or government regulators review your company’s financial reports.
How to perform an asset audit
Wondering how to perform an effective asset audit? First, determine what locations you’ll need to audit, and choose the team to conduct the audit. Then, your asset management audit can begin.
1. Note the essential details
Begin your asset audit by noting the basic-yet-noteworthy details of every asset you have on hand. These details can help make your asset more “visible” and verify the right items are in the right place.
Details may include:
- Asset location
- Asset model
- Asset manufacturer
- Asset serial number
- Asset manufacturing date (optional)
You can do this on a sheet of paper, a spreadsheet, or an asset checklist that’s been generated by your asset management software.
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2. Verify any additional characteristics
Your assets’ make, model, and serial numbers should provide tons of clarity during your asset audit. But an asset audit also presents an outstanding opportunity to update your inventory list and ensure all additional details are up to date.
Plus, if there are any discrepancies during your asset audit, these additional characteristics can help clear up confusion.
Extra details you may want to note about your inventory include:
- Asset SKU
- Asset color
- Asset supplier
- Asset user history
If you are using an inventory app to manage your audit, this is also a perfect time to add high-resolution images of your assets if you have not done so already.
3. Determine asset value
Next, your auditors may determine the current value of your company’s physical assets. To do this, they’ll need information about the purchase price, market value, and depreciation of your assets.
Since internal auditors usually aren’t accountants, your accounting department may work alongside the team that’s physically counting assets to determine the current value and rate of depreciation.
Accurate depreciation estimates help your business file more accurate taxes and financial reports—and can help you forecast when it might be time to replace or repair high-value assets, too.
4. Reconsider assets that move constantly
While you noted asset location early on in the asset audit process, you’ll want to consider not just where an asset is—but how much it moves.
Why? Assets that are frequently relocated—or, in the case of vehicles or heavy machinery, take on tons of mileage—tend to depreciate rather quickly. Same goes for equipment, technology, furniture that absorb a lot of use.
Because these assets’ useful lives might be shorter than expected, your audit is the perfect time to consider just how much mileage or time an asset might have left. Then, you can budget for replacement assets accordingly.
5. Update any and all asset tags
Your company, if it hasn’t done so already, should consider adding asset tags to all fixed assets in your inventory. Asset tagging can speed up your audits while helping you keep tabs on your company’s investments all year round.
If you don’t want to use official asset tags, you can use an inventory app like Sortly to print barcode and QR code labels.
What are the benefits of performing an asset audit?
Performing a regular asset audit has many benefits, from a more organized business to more efficient accounting processes. Here are some of the benefits you can expect to unlock when you perform an asset management audit.
1. A more organized, productive business
An asset audit isn’t just an opportunity for your company to verify the location and condition of your fixed assets. It’s also a chance to get your stockrooms, shelves, and storage facilities organized.
It’s also the perfect time to implement more efficient inventory management strategies, like practicing perpetual inventory and training employees to use intuitive inventory management software.
2. A more profitable, scalable business
When your assets and inventory are organized and accounted for, you’ll notice your business isn’t just more productive—it’s more profitable, too. And as your company grows, you’ll have the inventory management system in place to keep you organized across multiple locations.
3. Faster, more accurate accounting
Your asset audit provides key details about the whereabouts, condition, and value of your company’s investments. Your accounting team uses these numbers and figures to determine all sorts of things, from your business tax liabilities to your company’s value.
4. Improved corporate compliance
Finally, if your business is bound by government regulations or oversight committees, you’ll find that regular asset audits make filings that much easier.
Inventory management software for better asset management audits
With the right inventory management software, businesses can simplify every aspect of asset management. In fact, the best asset management app can help streamline asset audits and the everyday responsibilities of tracking physical assets.
The best asset management software will:
- Automate tedious processes, including checking items in and out of certain locations
- Remind you when an asset is approaching expiration or warranty end
- Offer key date reminders for preventive maintenance
- Help your employees keep perpetual inventory
- Instantly generate reports on your assets
- Get the whole team collaborating on asset management
Sortly is top-rated inventory management software designed for businesses of all shapes and sizes. With Sortly, companies can track all of their inventory and assets in one place. Best of all, Sortly can help your team breeze through asset audits, helping you create a detailed, easy-to-share list of everything your company owns.
Ready to get started? Try Sortly absolutely free for two weeks.