Ghost assets are fixed assets that are recorded in an organization’s fixed asset register but do not physically exist. These assets are often the result of poor fixed asset management practices, such as incomplete records, inaccurate tracking, and inadequate physical verification. In this blog, we will discuss how to deal with ghost assets in fixed assets management and prevent them from affecting an organization’s financial statements and bottom line.

Identify and Document Ghost Assets

The first step in dealing with ghost assets is to identify and document them. This can be done through a physical verification process that involves locating and counting all fixed assets in an organization’s inventory. This process should include identifying any assets that are no longer in use, have been disposed of, or are missing.

Once ghost assets have been identified, they should be documented in a separate report or ledger. This report should include the asset’s description, location, acquisition date, and other relevant details. This report can then be used to track the ghost assets and take appropriate action to remove them from the fixed asset register.

Determine the Cause of Ghost Assets

The next step is to determine the cause of the ghost assets. This can be done by reviewing the organization’s fixed asset management policies and procedures and identifying any gaps or weaknesses that may have led to the creation of ghost assets. Some common causes of ghost assets include:

• Incomplete or inaccurate fixed asset records
• Failure to perform regular physical verification of assets
• Failure to retire or dispose of assets properly
• Inadequate tracking and monitoring of assets

Develop a Plan to Remove Ghost Assets

Once the cause of the ghost assets has been identified, the organization should develop a plan to remove them from the fixed asset register. This plan should include the following steps:

• Update the fixed asset register to remove ghost assets
• Adjust the financial statements to reflect the removal of ghost assets
• Dispose of ghost assets in accordance with the organization’s policies and procedures
• Update fixed asset management policies and procedures to prevent future creation of ghost assets

Prevent Future Creation of Ghost Assets

To prevent the future creation of ghost assets, organizations should implement best practices in fixed asset management. This includes:

• Maintaining accurate and complete fixed asset records
• Performing regular physical verification of assets
• Properly retiring or disposing of assets
• Using technology, such as barcodes or RFID, to track and monitor assets
• Providing training to staff on fixed asset management policies and procedures

In conclusion, ghost assets can have a significant impact on an organization’s financial statements and bottom line. By identifying and documenting ghost assets, determining the cause, developing a plan to remove them, and preventing future creation, organizations can effectively manage their fixed assets and avoid the negative consequences of ghost assets.