How Important Is It for an Organization to Track Business Expenses?

Implementing asset tracking software is highly beneficial for an organization to grow its business and maintain control over its expenditure. Expenses represent the cost items involving outflow of money to any person or group to pay for any goods or services.

What are Business Expenses?

Business expenses are part of the company's income statement. Business expenses are subtracted from the revenue to reach an organization's net taxable income. Some expenses for an organization to run its business are fully deductible from income for tax purposes. Most of them are related to assets and equipment, for example:

1. Office Equipment and Supplies

2. Utility Expenses

3. Maintenance and Repairs

4. Lease and Rent

Expenses on these business assets and equipment are accounted for by depreciation. Depreciation is an indirect expense deductible on the basis of the income statement. Depreciation includes the costs of computers, furniture, property, equipment, etc.

What is Depreciation of an Asset or Equipment?

Each organization has assets and equipment that bookkeeping teams must consider when concluding the overall financial worth of the enterprise. An asset can be a vehicle, machine, or equipment owned by an organization for a longer period of time for its economic activity. The valuation of each asset decreases over time with progressive utilization. Thus, it is important for companies to continuously re-evaluate their assets. This is where depreciation comes into play.

As per Investopedia, “Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. Depreciation represents how much of an asset's value has been used up. Depreciating assets helps companies earn revenue from an asset while expensing a portion of its cost each year the asset is in use. If not taken into account, it can greatly affect profits.”

Depreciation can be calculated through various methods. With the implementation of asset tracking software, tracking depreciation also delivers many benefits, such as:

1. Precise asset evaluation & account keeping

2. Tax benefits

3. Well-informed financial decisions

How Does Asset Tracking Software Help to Track Business Expenses?

Asset tracking software is crucial for an organization’s operations and compliance. It is important to locate and replace lost or missing physical assets as well as plan for those that have come to the end of their lifecycle. Asset tracking solves several business challenges, with its framework allowing companies to become more efficient and boost their bottom line by making the best use of existing resources to achieve appropriate results.

Here are some benefits of asset tracking software that can help control business expenses:

1. Reduced Asset Theft

For instance, if you need a specific tool and cannot find it, this indicates poor management in operations. Such cases of lost assets without any records will result in unnecessary expenses. Then there are assets that are not physically present but are declared in the records, known as ghost assets.

Asset Tracking Software answers every possible question like: How do you identify a ghost asset? What is the solution for asset loss or theft?

2. Reduce Maintenance Expenses

Poor asset management not only leads to unnecessary expenditure on maintenance but also decreases the lifespan of an asset. At the operational stage of an asset’s lifecycle, an organization can encounter several maintenance issues. Asset tracking software can be of great help by providing all necessary information and data of assets, helping in scheduling maintenance jobs, and triggering alerts for users. It assists in growing the business by identifying unproductive items. Moreover, under-maintenance can lead to diminished efficiency, so regular maintenance and record-keeping are crucial.

3. Real-Time Asset Tracking

One of the main aims of implementing asset tracking software is to provide real-time information, especially when assets are in transit. From a manufacturing point of view, bulk orders are processed daily, and clients need to be informed about order delivery status. Real-time asset tracking helps in knowing the movement and delivery for each specific location.

4. Enhancing Asset Lifecycle

With asset tracking software, a company can see if an asset is working properly or needs maintenance. Overall, the system ensures that all assets are effective in operation and performing as expected. Being fully aware of asset status strengthens decision-making to save expenses and extend the asset lifecycle. One of the major benefits of asset tracking is that it tracks, manages, and increases the lifecycle of assets.

5. Unproductive Asset Detection

It is crucial to track unproductive items or items that are not in use but still incur maintenance costs. These types of equipment hamper organizational productivity. Asset tracking software can monitor and project the depreciation of items so they can be replaced when necessary. It also helps grow the business by identifying unproductive items.

6. Setting Re-order Levels

Inventory is part of the asset portfolio of an organization. A shortage of inventory adversely affects business, especially during peak season demand. It is crucial to maintain the right level of stocks at the required locations. Inventory management is important for maintaining the right stock levels and preventing overstocking. Knowing when and how much to reorder for each warehouse location is a basic question that many entities fail to address due to a lack of proper monitoring systems. Asset management software can define the “set re-order level” feature, notifying the responsible person when inventory goes below the set levels.

Conclusion

Healthcare, military establishments, government entities, and other sectors have substantial assets that need to be carefully and regularly monitored and managed. As assets might be required at any time to perform their functions, keeping them in a “ready to use” mode is crucial. Asset tracking management software provides companies with a competitive edge by offering great visibility and analytics. The solution also informs on how asset performance can be improved and how cost-effective opportunities can be leveraged with better decision-making.