P RELIMINARY R EPORT ON C OMPUTERIZED F IXED A SSET M ANAGEMENT

Analysis of prevailing scenario and identification of requirements for computerization of Fixed Asset Management

This report covers salient features of a general asset management software, the categories of tasks that an asset management software should supposedly offer, process map for implementation, a comparison with the available software at hand, customization required in the available software, initial queries outstanding at the end of the vendor, analysis of the prevalent system and the suggested flow from the existing system to computerized database encompassing the basic requirements of asset management and basic elements for future integration of the Asset Management System and the software being used at AlMoiz Industries Limited.

Mehmood Zubair Warraich (A.M System Development Function) 3/7/2011

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PRELIMINARY REPORT ON COMPUTERIZED FIXED ASSET MANAGEMENT

Analysis of prevailing scenario and identification of requirements for computerization of Fixed Asset Management
Following are the main headings and brief description of the content covered under them:

1. Salient Features of General Asset Management Software (GAM) Features that a GAMS offers and the functions covered by it to ensure the proper accounting, control maintenance, tracking, reporting and other salient features. 2. Process Map for Implementing Fixed Asset Management Philosophy This chapter covers Road to Implementation of Fixed Asset Management in the form of a process flow for the initial to the finalization of Computerized Asset Management. 3. Analysis of the Software Under Consideration Under this heading, a step by step analysis of the software under consideration on the basis of standard functions of asset management software and identifications of additional requirements and queries to be inquired is performed. 4. Tagging and Tracking Possible options for construction of a tag resulting in efficient tracking are discussed under this section specifically considering the structure of the organization. 5. Suggested Flow for Documentation and Uploading of Database A flow starting from financial statements and getting completed with the verification of physical assets is planned and presented under this section.

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Table of Contents
1. Salient Features of General Asset Management Software (GAM) .................. 3 1.1 What is Asset Management...3 1.2 Salient Features...3 1.3 Major Categories...4 2. Process Map ......................................................................................................... 5 3. Analysis of Software Under Consideration.....7 4. Tagging and Tracking.......9 4.1 Basic Structure of the Organization.9 4.2 Suggested Tags.11 5 Suggested Flow12

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1. Salient Features Software (GAM)

of

General

Asset

Management

1.1 What is Asset Management?

Asset management is a systematic process of maintaining, upgrading and operating fixed assets enhancing knowledge of capital assets and their respective values and establishing standard processes for investment decision making. It is a system framework that provides a measure of organizational performance and ties it to internal short and long-term planning linking business, engineering, economic theory to an organizations mission and provides tools for organized logical approach to decisions. Asset management guides development of infrastructure asset towards optimal benefit at minimal cost. There are trade-offs as to how benefit is defined to begin with and how much the organization is able to spend. Organizational mission is central to defining the benefits to be pursued which are ultimately determined by the voting public.

1.2 Salient Features:

Following are the salient features that an Asset Management Software offers; a. b. c. d. e. f. g. h. i. j. k. l. m. n. Recording asset types, categories, description and condition. Cost calculation compliant to applicable laws. Accountant and Custodian information. Identification of asset. Tagging and tracking. Transaction approval and processing procedure based on documented and approved standard operating procedures of the organization. Description of Custodian and Accountant responsibilities. Approval Limits and Budgets. Minimum capitalization level. Further capital expenditure and revenue expenditure relating to an existing asset recording. Various valuation techniques and Periodic Valuation options. Accounting and Tax depreciation. Financial Statement disclosures. Capital work in progress and engineering cost accumulation and transfer to fixed assets.

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o. Grouping of assets into major and minor categories. p. Information regarding ownership. q. Automated entry into general ledger.

1.3 Major Functions:

a. Accounting: Accounting function covers the process from procurement to disposal or write-off. Accounting functions includes; i. Valuation of assets. ii. Calculation of Tax and Accounting Depreciation. iii. Description and nature of the asset defined the required characteristics as per the organizations needs. b. Controls: This function incorporates the Standard Operating Procedures (SOPs) of the organization regarding procurement, maintenance and disposal of fixed assets. c. Tracking: Amongst the most important functions is the function of asset tag generation resulting in efficient asset tracking. d. Reporting: Reporting function encompasses both customized reports as well as statutory disclosures. It generates the information required not only for the internal use of the organization on the basis of pre-defined characteristics but also for the statutory purposes in compliance with the applicable laws. e. Maintenance: Maintenance function incorporates the further capital and revenue expenditure, revaluation or impairment effects and the maintenance alarms characteristic to an individual asset. f. Interoperability: Essential function of a GAMS is to be interoperable with the already implemented general ledger system in case the vendor is different not only to avoid redundancy but also to avoid the possibility of human error in transferring the information manually from one system to another. g. Data Input: Data input function incorporates the data as per the required fields based on the organizations need. h. Capacity of Software: Capacity of software is the maximum data that the software can efficiently process. i. Single Point of Entry: GAMS offers single point of entry so that at only one point the data is to be input and rest of the processing from addition to Fixed Register to entry in ledger and calculation incidental thereto are performed automatically.

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j.

Help/ Training: Help/ Training function informs about the various solutions to the possible problems that the user might encounter.

2. Process Map The Road to Implementation of Asset

Management
Start

Fixed Asset Management Goals Establishment

Manage Capital Planning

Create policies to determine whether to purchase from equity, lease or make loan. based purchase. GAP analysis for fixed asset capability 1.1

No Fixed Assets strategy supports corporate goal 5 Yes

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Yes Special fixed asset maintenance needs No Incorporate in software

I.T functionality appropriateness No

1.1

Yes

Fixed Asset I.T System

Minimum Capitalization

Choosing appropriate depreciation tool

Tax Policies

Policies for revenue and capital expenditure

Stop

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3. Analysis of Software Under Consideration

Following is the function-wise summary of the requirements and the queries; a. Accounting Function: Additions: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. Built of Cost is to be added in case of direct purchase as well as transfer from capital work in progress. Automatic voucher generation to be changed to manual user entered voucher number until full dependence on software. Addition of Revaluation/ Impairment impact. Addition of tab to incorporate further capital expenditure on the existing asset and a summary of revenue expenditures incurred on the assets. Addition of the option of custodian. Change in division to Head Office and Site or to Power Generation Unit and Sugar Manufacturing Unit. Threshold to be defined below which the software shouldnt accept any asset. Addition of comparison with the budget allocated according to business plan. Addition of tab to record warranty or service agreement terms. Addition of summary of depreciation to be generated on depreciation calculation run. Addition of option for different depreciation rates within the given category.

Queries: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv. xv. In case depreciation is change will the impact be retrospective as well or only prospective. Calculation of depreciation is on monthly basis i.e full depreciation in the month of purchase and no depreciation in the month of sale or daily basis. Supplier cannot be added. Cost Centre cannot be edited. G/L Coding structure to be edited. Disposal Code doesnt exist at our end. Location number is shown, location name is not shown in report. General Reports not working. Listing not working. Depreciation being calculated on daily basis, needs to be changed to monthly basis. Depreciation run not working. Tax depreciation not calculated. Disposal form inactive. Character limitation in tabs of make and capacity. Numerical entry tabs entry is always erroneous the first time.

b. Controls: It is a initial stage software only providing the accounting function. Incorporation of SOPs shall be performed once the Asset Management Function is

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c.

streamlined either on this software or on another comprehensive software and this software shall be rolled back. Tracking;

Addition; i. Addition of tag printing option of computer generated tags.

d. Reporting: Addition: i. Custom reports based on each individual and combination of characteristics of the asset to be added. Presently only 3 report generation options are available.

e.

Maintenance:

Addition: i. Addition of further capital expenditure revenue expenditure summaries for existing assets. Interoperability:

f.

Query: Possibility of integration with the existing CIS implemented general ledger system. g. Data Input: Data input function needs to be updated on the basis of above additions mentioned. h. Capacity of Software: Appropriate. i. Single Point of Entry: To be considered once the Asset Management Function is streamlined. j. Help/ Training: Addition: i. In case of error the cursor should automatically be shifted to the tab where the error exists. i.

4. Tagging and Tracking

Maintaining a positive identification of assets is the primary purpose of tagging. Tagging is important to:

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a. b. c. d. e.

Provide an accurate method of identifying individual assets, Aid in the taking of physical inventory, Control the location of all physical assets, Aid in maintenance of fixed assets, and Provide a common ground of communication for both the accounting department and the assets' users.

Some assets are not tagged. The asset number is still recorded in the system, but not physically attached to the asset. A description of the property is recorded, including address and plot location found in the Register of Deeds. Items not needing a tag are: a. Buildings (record legal description in asset record), b. Land (record legal description in asset record), c. Mainframe Software (record description in asset record). The construction suggested is based on the preliminary understanding of the structure of the organization.

4.1 Basic Structure of the Organization

ABC Industries Limited

Head Office Head Office

Marketing Accounts and Finance Human Resource Information Technology

SITE

Administration

SITE
Electrical Power House Administration Electrical Boiler House 9 Cane/ Agri. Department

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4.2 Suggested Tags a. Ledger Based:

Type----Category---Department---Minor Code A N A N In this construction category represents the respective ledger codes. b. Asset Group Based: Type---Category---Department---Minor Code A N A N In this construction category represents the group of assets to which it belongs e.g air conditioners, vehicles etc. c. Type---Category---Parent Code---Minor Code A N A N

10

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5. Suggested Flow for Documenting and Uploading Data

Start
Financial Statements from the incorporation of the company

General Ledgers

Vouchers and subsidiary details

Consolidation of data
Uploading on the Software

Completion of Phase 1
11