Introduction
FIT LLC, a prominent US port operator, encountered significant challenges with their fixed asset accounting. Issues arising from old transactions, such as unrecorded disposals and outdated depreciation schedules, created discrepancies between their financial books and physical assets. These problems led to financial reporting issues, risking non-compliance issues. To address these concerns, FIT LLC engaged CPCON GROUP to overhaul their fixed asset accounting and ERP system.
Investigation
The initiative began with a comprehensive investigation into FIT LLC’s existing fixed asset records. CPCON GROUP reviewed the fixed asset register, comparing it against the physical assets present at the port. This process uncovered issues arising from old transactions, such as missing asset documentation due to unrecorded disposals, outdated depreciation schedules from incorrect purchase dates, and assets listed in the books that were no longer on-site because of historical transfers. The investigation laid the groundwork for understanding the scope of the problem and identifying areas requiring immediate attention.
Analysis
With the investigation complete, CPCON GROUP conducted an in-depth analysis to pinpoint the root causes of the issues tied to old transactions. This involved examining FIT LLC’s asset acquisition and disposal procedures, reviewing depreciation methodologies, and evaluating the effectiveness of their current asset management practices. The analysis revealed inefficiencies in tracking and updating asset data from past activities, highlighting the need for a systematic reconciliation and a modernized tracking solution.
The reconciliation phase was pivotal in aligning FIT LLC’s fixed asset register with the physical assets on the port floor. CPCON GROUP performed a physical verification of all assets, ensuring each was accurately documented and accounted for, despite the challenges posed by old transactions. This process included:
- Updating asset descriptions and classifications based on historical data.
- Ensuring correct depreciation calculations.
- Removing assets from the register that had been disposed of in previous periods.
By the end of this phase, the book values accurately reflected the physical inventory, eliminating discrepancies and establishing a reliable baseline for financial reporting.
Tagging with RFIDs
To prevent future issues related to old transactions and enhance asset management, CPCON GROUP introduced an advanced RFID tagging system. Custom-made asset tags, designed and implemented by CPCON GROUP, were affixed to each asset. These RFID tags enabled:
- Real-Time Tracking: Assets could be monitored instantly, reducing the risk of loss or misplacement.
- Streamlined Inventories: Physical counts became faster and more accurate.
- Improved Accountability: The system provided a clear audit trail for asset movements, ensuring that future transactions are properly recorded.
This technology transformed FIT LLC’s ability to manage their assets effectively, ensuring long-term accuracy and operational efficiency.
Results
The restructuring project yielded substantial benefits for FIT LLC:
- Improved Accuracy: Financial statements now reflected the true value of assets, correcting issues from old transactions.
- Enhanced Compliance: The updated register and RFID system met regulatory and audit standards, reducing compliance risks.
- Better Asset Utilization: Real-time visibility into asset locations and conditions allowed FIT LLC to optimize usage, cutting costs and boosting operational performance.
These outcomes positioned FIT LLC for sustained financial and operational success.
The collaboration between FIT LLC and CPCON GROUP demonstrates the power of a methodical approach to fixed asset accounting. Through thorough investigation, detailed analysis, meticulous reconciliation, and the adoption of RFID technology, FIT LLC transformed their asset management practices, overcoming challenges rooted in old transactions.
Our work was presented to management and audited by a Big 4 auditing firm.
