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25% of Assets in the Industry are Inflated

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Articles in English
septiembre 25, 2017

 

The efficient management of fixed assets is key for any company and much more so in the industrial sector, where it occupies an important part of the assets.

 

The multinational corporation Ayming, a consulting firm specializing in this type of asset, has just sounded the alarm about the “mismanagement” that is being done in Spain in the industry.

According to the company, between 20% and 25% of the fixed assets on the balance sheet are “inflated” in the sector, with a value higher than real, and 10% are not correctly classified.

There is no bad intention in this matter if not simply bad business management, which impacts on the balance, as it does not reflect a true picture of the company. “We can even say, taking into account our experience, that 70% of industrial companies in Spain have property in fixed assets that do not exist,” adds Eduardo Ochoa, head of operations management at Ayming, in an interview with CincoDías. Among the clients of the consulting firm are not only SMEs, but also multinationals of great importance in the foreign sector.

There is no bad intention in this matter if not simply bad business management, which impacts on the balance, as it does not reflect a true picture of the company. “We can even say, taking into account our experience, that 70% of industrial companies in Spain have property in fixed assets that do not exist,” adds Eduardo Ochoa, head of operations management at Ayming, in an interview with CincoDías. Among the clients of the consulting firm are not only SMEs, but also multinationals of great importance in the foreign sector.

Poor asset accounting affects both SMEs and multinationals; in Spain there are 190,000 companies in the industry.

Motor and power supply

Although mismanagement is widespread throughout the industrial sector, it is concentrated mainly in the automotive and food distribution sectors. “In the case of the engine, due to the internationalisation of the sector leading to the continuous movement of parts and machinery; in food distribution, due to the abundance of machines dedicated to a multiplicity of processes”.

In Spain there are 190,000 industrial companies with an annual turnover exceeding half a billion euros and employ two million people, according to the latest data produced by the National Statistics Institute (NSI).

The impact of this mismanagement is threefold. On one hand, there is a financial impact, since if the real value of the assets is not correctly reflected in the accounts, “it ends up affecting the income and expenses generated”.

Secondly, from a tax point of view, you may be paying taxes (especially the EPI) on machinery that you do not have or at a much higher cost.

Thirdly, other additional costs are generated, such as the cost of appropriate insurance. “You may be paying to insure machines that the company does not have or their value is much lower than the real one,” he adds. In addition, good inventory control allows you to make decisions that can reduce the value of your investments or adjust your insurance premium and maintenance costs to reality.

On the other hand, a good inventory control allows to eliminate or reduce legal reservations, and make correct decisions in the case of a sale of the company.

Steps to follow to control the immobilized:

Inventory. The first thing to take into account is to have an updated inventory, according to the physical and accounting reality, to have correctly identified (description, state, location and useful life) the fixed assets. Secondly, to carry out a permanent management of assets, from their acquisition until the day they are deregistered or sold. Key to this is an efficient information system that allows for appropriate monitoring.

Depreciations. The review of assets must be carried out at least once every two years, especially fixed assets. A correct classification of assets and the calculation of depreciations are important. It is also important to have an independent, itemised register of the invoices justifying the investment.

Source: Cinco Días

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