When your district or school experiences a natural disaster or other covered events that result in a property loss, you’ll need to file an insurance claim to recoup the associated costs. This process involves a fair amount of detail-oriented documentation and verification, which is why a fixed asset inventory is essential for insurance claims. This article explains why fixed asset inventories are important for insurance claims, what a fixed asset inventory entails, and how you can implement this best practice in your organization.
What is a Fixed Asset Inventory?
A fixed asset inventory is a thorough and manual review of an organization’s physical assets and records. This review is intended to confirm that all assets are accounted for, and determine whether these assets are accurately valued. The goal of a fixed asset inventory is to ensure that there are no discrepancies in the reporting of an organization’s fixed assets. A Fixed Asset is an asset that has a useful life of more than one year and is not consumable in nature. Examples of common fixed assets in schools include machinery, technology, kitchen equipment, and vehicles.
Why is a Fixed Asset inventory Important for Insurance Claims?
To process an insurance claim your insurer will likely require one or more of the following: Proof that the cost of the damaged property has been properly accounted for in the districts’ records; An independent valuation of the damaged property; or An independent appraisal of the cost to rebuild the damaged property. When a fixed asset inventory has been performed by a 3rd party company, such as Divot Assets, this part of the claims process becomes seamless and hassle-free. Depending on when a covered loss may occur, a school does not have time to separately account for losses and go through a long drawn-out process. Their focus needs to be on returning to the classroom as quickly as possible with their necessary teaching materials and equipment fully restored.
An up-to-date record of all assets including their locations, especially when created by an outside party or organization, is the most reliable way to ensure that an insurance company will honor the replacement costs of all lost property. Without this record, an inevitable negotiation occurs between the district and the insurer as to what items were actually located in the affected buildings and thus what items were truly lost.
What are the steps in a Fixed Asset inventory?
The following is a breakdown of steps in a fixed asset inventory:
- Review the masterfile of all fixed assets: Review the organization’s records related to all fixed assets; usually in the form of a digital master file.
- Perform Physical Inventory: At this point a manual count and verification of all Fixed Assets in the district should be performed.
- Reconciliation: This is where you compare each item in the new inventory file with the asset masterfile to identify any assets that have gone missing, have changed location, or have been newly added in the district.
- Digital upload/update masterfile records: Finally, a good inventory process will be useless unless your records can accurately and easily be updated. Divot Assets is the only company with the capability to seamlessly upload your inventory/inventory findings back into your accounting software. Saving untold hours of manual work updating your asset records.
How to perform a fixed asset inventory
The best way to perform a fixed asset inventory is to follow the process outlined above. However, there are a few ways that an inventory team can make this process more efficient.
- Assign a team member to oversee the inventory and ensure that all inventory tasks are documented and properly executed.
- Use technology to streamline and automate the inventory process wherever possible. For example, use a spreadsheet or database to track the inventory process, or use a software solution like K12 Asset ManagerTM to track all inventory, including fixed assets.
- Use a checklist to guide the inventory process and ensure that all critical inventory tasks are completed.
Recently more and more District’s are moving toward a 3rd party company to assist with the inventory and record updating process. Divot Assets is the only company capable of providing start-to-finish white glove service to insure a flawless inventory.
Conclusion
While we do not ever expect the worse to happen to our school, the fact is you never know when you may need to use your insurance to cover a loss. For anyone who has ever had to use insurance, for any reason, you know that the process can be lengthy, time-consuming and inconvenient. The insurance company will likely require one or more of the following: Proof that the cost of the damaged property has been properly accounted for in the business’s records; An independent valuation of the damaged property; An independent appraisal of the cost to rebuild the damaged property. While there are many goals of a fixed asset inventory, not the least of which is federal and state accounting standards, there are also many other benefits! Such as helping to seamlessly submit and recover major losses during your next insurance claim!
