Over the past few years, much has been reported in the media about empty office blocks, deserted city centres, and bedrooms being turned into fully functioning workstations. When the Covid pandemic hit, many of us made a seamless move to flexible working from home. Almost overnight, companies faced a monumental shift in the way they worked to resource an office-based workforce who now needed all the assets and equipment to work remotely. This shift has involved buying or re-locating many IT equipment and other fixed assets, leaving other assets unused for months. So, how has our use of fixed assets changed during the pandemic and what have we learnt moving forward?
Two years on, many companies are now trying to track, account for and manage the assets that rushed onto the register. We have been forced to re-think what assets are still essential in the new reality and what to do with those that are not. Like every business area, fixed asset management has had to become more flexible to meet the ever-changing demands placed on our assets, and fixed asset management solutions providers have continuously met these challenges.
Let’s start with buildings. A factory with heavy manufacturing equipment and vast production lines does not suddenly become superfluous to requirements because employees are working at home – they can’t. The factory is as essential to the business as it always was.
In contrast, sizeable city-centre office spaces have been at least partially replaced by garden offices and bedrooms. It seems unlikely that even post-covid, we will return entirely to the commute driven lifestyle of 2019. Some organisations have decided to downsize their properties as a result.
Terminating or amending a lease may be quick and easy to arrange. Early termination may attract early settlement charges, but the savings from downsizing can often offset these. Even if the leasehold is still required, it may be possible to renegotiate the lease terms.
Tracking and reporting on these changes can be more complicated. Many companies are still using spreadsheets to track their leases, which works well for simple calculations, but is not suitable for handling complex lease arrangements or mid-term adjustments like payment holidays and changes in payment amounts or payment terms.
In recent years, the introduction of the IFRS 16 lease accounting standard across most of Europe means that almost all leases are now treated as fixed assets. All of these lead to changes in the right of use (ROU) asset values on the balance sheet. This has seen a clear shift away from spreadsheets to specialist lease accounting systems designed to automate and simplify the lease management process.
Companies with purchased property on the balance sheet may have seen significant drops in property value and demand, particularly for city offices. This has resulted in some organisations being left saddled with half-empty office buildings, which they are struggling to offload.
It wasn’t only school pupils rushing off to PC World to buy themselves a laptop when lockdown hit. Employees up and down the country were suddenly being kitted out with laptops, headsets, webcams, and other equipment we never knew would become daily essentials.
Although some of these items fell below the capitalisation threshold, they all need to be tracked and eventually repaired, re-assigned or replaced. Paper-based or spreadsheet tracking tools that were not ideal before lockdown suddenly became completely inadequate as thousands of new purchases needed to be added, assigned and tracked. In some cases, hundreds or even thousands of hours have been spent trying to update equipment registers and implement the controls required retrospectively.
Equipment should be clearly recorded, but whether this is done at the point of order, goods receipt, or invoice may vary. This is particularly important now that assets are not all delivered to, or based in, the office.
To improve tracking and visibility, companies are increasingly moving towards having a central company-wide asset register. Most good fixed asset management systems will track both capital and low-value items, including owned and leased assets. They will also record important asset data such as their status, location or important dates.
Barcoded asset tags are not new, but they are a great way to quickly identify a fairly generic and mobile asset such as a laptop. If an employee leaves the organisation, it is critical that the asset manager can quickly and easily identify all assets allocated to that user and re-assign them.
Many organisations have discovered the huge benefits of running cloud-hosted Saas solutions over lockdown. Cloud hosting simplifies implementation, support and upgrades but perhaps more important is the ability to support remote access. Self-hosting may be an option for larger companies, especially if there are special requirements such as additional data security needs, but for smaller firms, cloud-based software is usually simpler and easier.
A Flexible Future
The last few years have taught us that change is perhaps the only constant we can rely on. It is difficult to know how our work environment may change in the future, but it seems certain that asset management as a discipline will require more, not less, flexibility. Paradoxically, achieving that flexibility may actually require greater control and centralisation of the asset management function rather than less. We should expect to see more asset managers with cross-functional responsibility supported by specialist software systems and tighter business processes.
About the Author
Vicky Stanley is an experienced Fixed Assets Accountant with over 20 years of experience in helping companies to manage their fixed assets more effectively.
Vicky lives in Kent in the United Kingdom with her family. After completing her ACCA qualification, Vicky started her career in accounting before moving into software and specialising in Fixed Asset Management Software.
Vicky has project managed software deployments for organisations like the NHS and Foxtons in the UK and implementations across Europe, North America and even as far away as Japan.