Goldstrike Fixed Asset Solution ™ Paragon Systems 1 FAS - Generate Cash Flow Scott Swarts Session...

Goldstrike Fixed Asset Solution ™

Paragon Systems1

FAS - FAS - Generate Generate Cash FlowCash Flow

Scott SwartsScott Swarts

Session 2Session 2Room BRoom B

Tennessee’s

BEST 2005 Tech

Tips User

Conference


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AgendaAgenda

• Session Overview• Taxes, SOX and related issues• Review benefits of implementing fixed

asset management system• Discuss implementation and inventory• Review demo of fixed asset software• Sample bar code tags and scanner• Q&A


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PARAGON International, PARAGON International, IncInc20 years of service and over 50 million assets

reviewedPARAGON SYSTEMS:• Dedicated to enhancing fixed asset management• Sage Software™ Charter Business Partner • Complete Solution of hardware, software, servicesPARAGON VALUATION GROUP:• maximizing corporate tax benefits• Cost segregation and Tax Engineering• Valuation and appraisal services


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TAX, S.OX, ISSUESTAX, S.OX, ISSUES


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““Bonus” DepreciationBonus” Depreciation

• Workers Job Creation Act• Immediate Write off• Reduction in Basis• Bonus 30-50%• Sept 11, 2001 – 2004• Dates for change to 50%


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Sarbanes Oxley Act Sarbanes Oxley Act BackgroundBackground

• Overview - Not legal or financial advise, consult your professional auditor or accountant

• 2002 Congress passed new regulations designed to improve governance of public corporations

• Reduce fraudulent corporate reporting• Holds CEO’s and CFO’s personally responsible for

accuracy of financial reporting


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Sec 404 - Internal Sec 404 - Internal ControlsControls• Management responsible to assessment

of internal controls over financial reporting including IT controls

• Establish and document internal controls on how information enters the company and relates to completion of annual reports


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Fixed Asset Inventories and Fixed Asset Inventories and SOXSOX• Accurate inventory is the core of solid

financial reporting• Physical Inventories conducted using same

method• Procedures for reconciliation • Barcoding Assets• Standardization on naming conventions


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Asset Management & Asset Management & Control Control


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ObjectiveObjective

• Improve control and reduce labor costs of asset management

• Automate and simplify the task of tracking fixed assets

• Identify unrecorded retirements (15-30%)

• Create CASH FLOW!


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What Are The Benefits?What Are The Benefits?

(Inquiring Minds Want To Know)


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Minimize Operating Minimize Operating ExpensesExpenses

• Federal & local taxes• Third party accountability• Property taxes

(disposed/transferred assets)• Write off of retired assets• Track maintenance/service costs


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Support Strategic Support Strategic Management PlanningManagement Planning

• Depreciation expense projections (book & tax)

• Forecast asset ratios• Cost Center budgeting and control


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Determine Proper Determine Proper Insurance CoverageInsurance Coverage

• Avoid risk of being underinsured• Minimize “proof of loss” exposure• Accurate premiums / fire rates• Base coverage on replacement

costs not historical costs


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Eliminate Unnecessary Eliminate Unnecessary Asset PurchasesAsset Purchases

• Idle or unassigned assets


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Identify Unrecorded Identify Unrecorded Retirements & TransfersRetirements & Transfers

• Document write-offs


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Ghost AssetsGhost Assets

• Assets that are no longer there but cost still on the books

• Group type entries from projects• Unrecorded damage or abandonment,

replacement• Partial Disposals , Transfers• Typically find 15-30% unrecorded retirements


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Controllable Property UnitsControllable Property Units

• Break assets into manageable groups based on operational needs

• Truck with multiple assets for service or equipment

• Manufacturing line – Components, motors, process sections, engineering fees

• Server with sub-components


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GoldStrike Solution GoldStrike Solution SummarySummary• Complete corporate asset database

installation/conversion• Physical inventory and bar coding of all

assets• Cost Reconciliation • Setup new asset ledger in FAS and

provide training


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Economic Benefits of Project Economic Benefits of Project ImplementationImplementation• Are your current asset records

accurate within 95% of actual asset inventory physically there?

• If we find unrecorded retirements in excess of 5%, the project typically GENERATES CASH FLOW!!


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BREAK EVEN and ROIBREAK EVEN and ROI


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ABC Company's Major ABC Company's Major Fixed AssetsFixed Assets

Fixed Asset Qty Avg. Value Total Value

Printing Press 50 $30,000 $1,500,000Folding Machine 20 $5,000 $ 100,000Cutters/Trimmers 20 $5,000 $ 100,000Binding/Stitching 30 $5,000 $ 150,000Shrink Wrap Equip 10 $5,000 $ 50,000Prepress/Camera 20 $15,000 $ 300,000Misc. Equipment 100 $3,000 $ 300,000

Total 250 $10,000 $2,500,000


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Income TaxIncome Tax

• Total cost of fixed assets $2,500,000

• Avg. value of ghost assets ($2,500,000 x 7%)$175,000

• Accumulated depreciation $70,000• Net book value/potential write-off ($175k - $70k)

$100,500• Tax rate x 0.39• Total income tax overpayment $40,950


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Property TaxProperty Tax

• Total cost of fixed assets $2,500,000• Avg. value of ghost assets $175,000• Less accumulated depreciation factor (70%)

$122,500• Taxable base ($175,000 - $122,500)

$52,500• Representative assessment rate x 0.045

• Total property tax overpayment per year $2,360


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InsuranceInsurance

• Total cost of fixed assets $2,500,000• Avg. value of ghost assets $175,000• Avg. insurance payment per fixed asset 0.01 per $1• Total insurance overpayment per year

$1,750


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SummarySummary

• Total income tax overpayment $40,950• Property tax overpayment $ 2,360• Insurance overpayment $ 1,750

• Total overpayment $45,060• Estimated cost of fixed

asset management solution $25,000

• Return on investment (ROI) Immediate!


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IMPLEMENTATIONIMPLEMENTATION

Let’s Get Started!


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Managing Asset Activity Managing Asset Activity ExampleExample• Invoice costs are logged to a clearing account for

new capitalized assets• Copies of Invoices are collected in folder for month

end processing• Disposals are documented and tag information

sent to accounting via paper or electronic disposal form

• Asset activity logged in tracking system• Monthly asset and depreciation reports


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Implementation Plan Implementation Plan ChecklistChecklist• Review internal processes for managing assets• Set goals for implementation• Establish plans for inventory, what and how • Perform inventories• Reconcile results with existing ledgers• Prepare final reports of results and document write-offs

or additions• Setup for ongoing management in a fixed asset system• Document and train on new procedures for ongoing

management


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FAS Software by SAGEFAS Software by SAGE

• #1 Fixed Asset Management Application• Chosen 3 to 1 over alternative systems• Integrates with virtually any GL System• Over 300,000 tax rules and regulations • Integrates with Bar Code Technology • Automated Reconciliation Processes

Goldstrike Fixed Asset Solution ™ Paragon Systems 1 FAS - Generate Cash Flow Scott Swarts Session...

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