Ability to track asset details and calculate depreciation using various methods

Description

The software should facilitate the management of capital assets, capture relevant details, and allow depreciation calculations through different methods such as straight-line, reducing balance, and others. Efficient tracking of assets and depreciation is vital for businesses to manage their capital investments, weigh the cost of replacing assets, and make informed financial decisions.

Example Use Case

Scenario: An enterprise-level manufacturing company manages a large number of machinery and equipment. The company uses CPM software to track its capital assets, monitor their lifespan and calculate depreciation for financial and tax reporting.

Solution: The CPM software records details of each asset, including purchase date, expected lifespan, salvage value and depreciation method. For instance, a machine with a cost of $100,000, a lifespan of 10 years, and no salvage value, can have its depreciation calculated using the straight-line method, leading to an annual depreciation expense of $10,000. This automated calculation eases financial planning and tax computation and is easily reflected in financial reports.

Considerations

Pre-built depreciation methods make the implementation process more efficient, as you are not paying consulting fees for complex formulas to be built. They're also more reliable than something custom-built as they are intended to be used across many customers and data sets. However, most vendors don't support all methods, and some have limitations with how that depreciation cost is spread across the model. For example, some will assign all depreciation expenses to a single account. You may want it assigned to multiple accounts, and you may want to allocate it differently across products or departments. Make sure the product has sufficient capabilities for your needs.

Also consider the type of assets that are included in the system. It is just equipment, or do they support the entire PP&E (property, plant, and equipment) stack?

Questions to Ask a Vendor

• Asset Management: How does your solution facilitate tracking of asset details? Does it support batch import for bulk assets?
• Depreciation Calculation: What variety of depreciation methods does your software support? Is the calculation conducted automatically by the system?
• Depreciation Allocations: Does the system support distribution of costs across the model?
• New Methods: Are we able to create new methods in the event your system does not include what we need?