Depreciation

Introduction

Once an organisation has an accurate record of its assets and their current value, the next step is to keep those values up to date by allowing for depreciation. Often, accounting systems rely on users manually updating asset values based on a calculation done outside of the system.

These manually posted journals, often are not linked directly with the asset to which they relate.  Cloud accounting allows depreciation to be automatically calculated and posted so that the business always has an accurate current value of its assets.

Typical Problems

In a system without automated depreciation, the required calculation and journal postings can be a very manual process, and this can be time consuming, especially where there are large numbers of assets to calculate. 

Journals may be grouped for efficient processing, but this can make historical valuations difficult to obtain.  Asset grouping is also often based on one combined value, with no indication of how it is made up, or the individual assets are listed without clearly defined relationships.

In the first case, getting an individual asset value is difficult, and in the second a grouped value requires further calculation outside of the system.

Often the reporting available is very limited, for example only showing current value without the ability to see historical data or trends and forecasts.

Solutions

With cloud accounting, automation can be used to post depreciation journals automatically, saving time and energy for the teams involved.  This can also be done for grouped assets, meaning that the current and historic value can be viewed for both an individual asset in the group, and the overall value of the grouped assets. 

With in-built analytics and powerful reports, it is easier to use this data to generate true business insight, and reports can be run on automated schedules and sent directly to recipients.

Benefits/ROI

Automated depreciation calculation and recording reduce the margin of error and remove the manual processing and posting that may have previously been required, giving back valuable time to be spent on more valuable activities. It also improves the consistency of calculation methods, allowing businesses to bring greater control to their accounting processes.

Grouped or individual valuations are obtainable at the press of a button, showing historical and current valuations, allowing for more accurate tracking of asset values

Powerful automated reports, with appropriate levels of detail, allow the business to generate true insight from their financial data.