Is Asset Depreciation important for Maintenance Department
The CMMS which the maintenance teams use to organize the operations is mainly accessed by other departments which include the finance department. The department requires access to software for tax purposes and bookkeeping.
Through the CMMS, the tax and accounting specialists review major and minor repairs which are made to capital assets. The minor repairs are deducted immediately where the major repairs or any improvements are said to be depreciated over time.
After there is a retrieval of data from CMMS, the finance team retrieves data from the other software’s like enterprise asset management (EAM) software. The CMMS is used for tracking repairs and another system for tracking the value of the assets over the years where this is regarded as inefficiency.
To help improve any efficiency, the CMMS is making it easier for the companies to store all the asset-related data in one place with the features like depreciation tracking.
So below are the benefits of tracking the asset depreciation in CMMS
1. Eliminating the redundant data entry
Rather than entering the same data in the EAM software, ERP software and the accounting software’s like QuickBooks, the asset managers can log the data once in the CMMS. The CMMS then syncs with other software’s. For example, when a major repair is completed of an asset, the maintenance team then logs the parts and cost data in the CMMS. Instead, the asset manager emailing the finance team about the repair, the CMMS can automatically send the information to the QuickBooks.
2. It aligns finances and the maintenance teams
Since depreciation is an allocation process and not a valuation process, the maintenance team can align better with the accounting team, when there is bookkeeping data in the CMMS.
3. There is a reduction of expenses with less software
In addition to EAM, there are customers who use the CMMS software. Usually, this is considered unnecessary since CMMS has an asset specific feature like warranty tracking, downtime tracking, and depreciation tracking. Since CMMS and EAM software can cost a lot of money, it is considered to be irresponsible to have two systems with the overlapping features.
Below is the way to track the asset depreciation in CMMS
1. Purchase price- The amount which is paid to acquire the asset
2. Residual price- The asset’s worth which is at the end of its useful life or how much you can sell it, where it is called the salvage value.
3. Useful life- This is how long the asset is expected to help the organization create a product and generate revenue.
4. The placed-in-service date- The date in which the asset is initially activated in the facility.