Most distributors make significant investment in capital equipment to run their warehouse operations. It’s not uncommon for these assets to make up over 10% of a wholesale distributor’s balance sheet assets. For companies who minimize stock value by purchasing only to meet customer demand or who drop ship a lot of items, fixed assets account for an even higher percentage of overall company assets.

Given this high fixed asset value, many distributors are missing out on significant cost savings. There are four key areas where costs can be reduced:

• Accurate, automated depreciation calculation, not only reducing errors but also maximizing tax deductions under increasingly complicated fixed asset depreciation rules.
• Tracking the location of fixed assets, reducing asset loss.
• Holding employees accountable for assets they use, also reducing losses.
• Analyzing the impact of fixed assets on financial performance, helping to better fine-tune the asset replacement cycle.

Given the complexity of the corporate tax code, many companies do not take full advantage of asset depreciation allowances. Proper asset categorization can affect which depreciation schedule is applied. This is particularly true given the changes made since September 11, 2001, when the U.S. government moved to stimulate business activity by accelerating first-year depreciation schedules. For example, the cost of computer software purchased after 9/11/01 can be depreciated more quickly under the new rules.

Within a warehouse, the importance of analyzing, tracking, and accurately depreciating capital equipment investment is significant. Computers run most warehouse operations, including picking, packing, shipping, and receiving functions which can be directed effectively from handheld devices. Forklifts are required to move pallets or heavy items. They are also indispensable for receiving merchandise and frequently used for shipping. Some facilities may automate bin picking using carousels, or even use series of conveyor belts to move merchandise to pick, pack, and shipping staging areas. Even quality assurance testing can require specialized equipment for testing, particularly in electronics industries.

Many distributors engage in some form of assembly or even light manufacturing. For these companies the capital invested in injection molding, presses, lathes, or other machinery which automates the assembly process can be significant. Typically a formal return on investment (ROI) financial analysis is completed before the equipment is purchased. That means that accurately tracking the depreciation of the equipment is critical to profitably costing products and running the business.

Many distributors also require accurate fixed asset tracking for delivery or service vehicles. Delivery trucks range from small regional cargo vans to full-sized trucks.

A wholesale distributor often needs to track fixed assets that beyond the warehouse, and even beyond the confines of a traditional office. For instance your mobile sales force might all carry laptops and communicate with the home office electronically. As assets become more mobile, it becomes imperative that they are inventoried correctly and assigned to employees who are held accountable for them, which can be automated with fixed asset inventory tracking.

Now you can reduce cost by tracking assets and automating their depreciation. But more importantly, you can leverage the analytical capabilities of an integrated system to make insightful business decisions.

Clearly the investment in capital equipment to run a business is significant. For wholesale distributors, this asset investment can take on even greater strategic importance. Improving fixed asset tracking can reduce business costs in the following ways:

• Maximizing tax benefits and financial returns by automating complex depreciation schedules.
• Tracking the location of fixed assets, reducing asset loss.
• Providing real-time asset location tracking.
• Understanding the financial impact of fixed asset decisions.

If you need help sorting out your fixed asset situation, or just want to automate time consuming manual tracking, talk to CompuData about FAS, Best’s Fixed Asset solution.