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

Implementing asset tracking software is very helpful for an organization to grow its business and get control over its expenditure.

Expenses are 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:

• Office Equipment and Supplies
• Utility Expenses
• Maintenance and Repairs
• 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 is included with the costs of computers, furniture, property, equipment, etc.

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What is Depreciation of an Asset or Equipment?

Each organization has assets and equipment that bookkeeping teams must take into consideration when concluding the overall financial worth of the enterprise.

An asset can be vehicle, machine, and equipment owned by an organization for a longer period of time for its economic activity.

The valuation of each asset decreases as time goes by and its progressive utilization. Thus, it is important for companies to re-evaluate their assets continuously. Here 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, depreciation tracking also delivers many benefits, like:

• Precise asset evaluation & account keeping
• Tax benefit
• Well-informed financial decisions

How does Asset Tracking Software help to Track Business Expense?

Asset tracking software is important for an organization for its 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 an end of their life cycle.

Asset tracking solves several business challenges, with its framework allowing the 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 you control business expenses.

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Reduced asset theft

For instance, where you need a specific tool and cannot find it, it is bad management in operation. Such cases of lost assets where there is also no sign of any documents will end up with unnecessary expenses.

Then there are those types of assets that are not physically present but are declared in the records. These are called 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?

Reduce maintenance expenses

Bad management of Assets not only leads to unnecessary money expenditure on maintenance but also decreases the lifespan of an asset. At the operational stage of the life cycle of an asset, an organization can confront several maintenance issues.

Here asset tracking software can be of great help. It provides all information and data of assets and helps in scheduling maintenance jobs as well and triggers alerts for the users. It assists in growing the business by identifying unproductive items.

Moreover, under-maintenance can lead to diminished efficiency. Therefore, maintenance has to be done regularly and record of maintenance is also enabled by the software.

Therefore, the asset tracking software helps keep track of the assets. Moreover, the available records can identify which asset needs maintenance. This system prevents unexpected breakdowns and saves on such expenses.

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, a lot of bulk orders are processed on a daily basis and they need to keep their clients informed about the order delivery status. Therefore, real-time asset tracking helps in knowing the movement and delivery for each specific location.

Enhancing Asset Life-cycle

With asset tracking software, the company has the capability to see if an asset is working properly or it needs any kind of maintenance. Overall, the system makes sure that all assets are ineffective operation and performing as per expectations.

When you are completely aware of what's going on with your assets, your decision process gets strengthened to save expenses and extend the life cycle of assets. One of the major benefits of asset tracking is that it tracks, manages, and increases the life cycle of assets.

Unproductive Asset Detection

It is crucial to track unproductive items or items that are not in use but still money is being spent on maintaining them. These types of equipment hamper the organization's productivity.

Asset tracking software can monitor and project depreciation of items in order that they can be replaced when the time comes. Also, It assists in growing the business by identifying unproductive items.

Setting Re-order Level

Inventory is part of the asset portfolio of an organization. A shortage of inventory affects business adversely, especially in peak season demand.

It is, therefore, crucial to maintaining the right level of stocks at the required locations. Inventory management is thus not only important in terms of maintaining the right stock levels but also preventing from overstocking.

Knowing when and how much to reorder for which warehouse location is a basic question. However, many entities fail in this area due to the lack of a proper monitoring system.

Asset management software can define the  “set re-order level” feature. This enables in notifying the responsible person when the inventory goes below the set levels.

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Conclusion

Healthcare, military establishments, government, etc. have huge assets that need to be monitored and managed carefully and regularly. As the assets might be required any time to perform their functions, keeping them in  “ready to use” mode is crucial.

Asset tracking management software gives a competitive edge to companies by providing 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.