As another end of the fiscal year rolls around, many of us are busy closing off books, processing those ‘just-in-time’ invoices and preparing for an onslaught of legislative report. One of the notable time consumers for this period has always been the process of capitalising expenditures through to the asset registers. The bulk of this time is, typically, focused on the reconciliation of renewal spending. In this blog post we will discuss the tools and methods applied through the Metrix Asset Management system that make this process simpler, faster, and smarter.
But first, a brief note on what is complicating the renewal processes.
The changing landscape of renewal projects
If reconciling your renewals has become increasingly more difficult of late, then you are not alone. In recent years, the process of capitalising and recognising the effects of renewal expenditures on the asset register has become progressively harder, and in turn, a much more resource-intensive task. There are several factors contributing to this trend:
- The volume of renewal expenditures has increased dramatically following the widespread flood and fire events across the eastern seaboard of Australia in recent years.
- The increased practice of projects seeking ‘economies of scale.’ Such works are often characterised by their dispersion, with work sites scattered across large geographical areas. For example, large-scale road resealing programmes, and sewer pipe relining initiatives.
- A concerted effort by many organisations to focus on ‘repairing what we have’ and focusing on reducing the infrastructure backlog that has dominated the industry.
- The impact of legislative requirements on asset capacity and function necessitates upgrades to coincide with renewal works. This further complicates how the recognition of spending occurs.
- When grant funding is involved, the increased requirements around organisations “proving” their spends and linking the results.
In individual cases of course, there are likely to be other contributing factors to the increased complexity of capitalising renewal spends. The take home from the above however, is that the trend of complex renewal capitalisation is likely to continue, and asset teams need to be ready and accountable to this process.
Asset teams need understand these financial obligations and ensure that the correct tools are in use. Tools that enable them to be as efficient as possible throughout the capitalisation process – ideally throughout the year as projects progress.
How can Metrix help?
Considering the ever-growing complexity of the capitalisation landscape, asset teams must have confidence that the tools they leverage are:
Referencing a “single source of truth.”
The Metrix Asset Management system guarantees its users have a “single source of truth” for ALL their asset information. This includes:
- finances,
- spatial features,
- engineering attributes,
- customer requests,
- defects, and
- ancillary information registers.
Metrix is one system, with one register, and many tools.
All this information, linked through to a controlled and centralised asset register, ensures that every user across the organisation receives the same story when both making decisions, and reporting on those decisions.
Flexible (yet auditable) to the malleable nature of asset networks.
A common misconception about a “single source of truth” for asset information is:
When it comes to the Metrix Asset Management system, this is very much NOT the case. The following examples explain some of the reasons why.
Asset/Component Split Tool
The ability to split an Asset is vitally important in keeping the organisation’s financial reporting, engineering concepts, and asset management data policies in-sync. The built in ‘split tool’ offered within the Metrix Asset Management system allows GIS/Asset administrators to divide existing assets and/or components on a spatial basis into smaller segments without affecting the overall capital valuation of the underlying entry. This enables a wide variety of workflows including:
- Cutting in a new off-shoot segment
- Splitting a single component to recognise a different lifecycle profile (i.e. partial works)
- Simply reworking the segmentation of a network for management reasons
Regardless of the reason for performing a split, the outcome is the same. The original gross and accumulated depreciation values are proportionately migrated to the new features with no gain or loss in overall fair value.
Transaction Ledger Isolation
When it comes to prudent financial reporting, the integrity of the ledger is paramount. That is why the Metrix Asset Management system maintains a safe buffer between attributes that may affect capital value, and the actual postings that make up the capital value. Without overcomplicating end-user workflows, this separation of impacts means that asset teams can continue to maintain their data to reflect the current state of play; whilst the accounting team have access to dynamic historical snapshots of the asset registers. Lastly, any change to the capital valuation ledger must posted by authorised users via dedicated transactions written to the system.
Adaptable to changeable funding sources and construction methodologies.
Across the span of a single reporting period, intervention plans can change dramatically in terms of their scope, funding source, style of treatment, and more. The Metrix Asset Management system caters for this by implementing an adaptable capital budgeting and reconciliation methodology.
From the asset team’s perspective, they can maintain not only a component’s current intervention treatment details, but details about the ideal NEXT intervention treatment. Further to this, once a component hits a budgeting phase (i.e. budgeting for upgrade or renewal) there exists a third opportunity to override a component’s budgeted treatment definition. This caters for all kinds of scenarios including reseal programs, heavy patching programs, pipe relining, and more.
Whilst in the budgeting phase, users can move components around and between different budget plans easily. This allows organisations to better tailor a specific work plan, to the funding source that best aligns with it. Then, when it comes to capitalisation of the budget works, each budget will effortlessly reconcile the capital valuation ledger impacts for each component, regardless of funding source.
Able to integrate and work alongside other software packages.
The software landscape is not known for being too friendly. Different vendors will actively seek to lock users into ‘their way of doing things’ without any consideration as to how this effects end user experience. It is in this way that Metrix is a hugely different software company. A common focus throughout all elements of the Metrix Asset Management system is that client data always belongs to the client and that using any provided workflows should not preclude users from relying partially or wholly on other systems.
A prime example of this, as it pertains to the end of year capitalisation process, is the cost tracking system implemented in the capital budgets processes. Users are free to log and track costs in whatever way suits their organisational needs. When it comes to applying the spends to the budgets for capitalisation, it can be as little as a single entry reflecting the grand total of an externally managed work order, or as detailed as inputting each cost item associated with a project. At the end of the process, the available capitalisation tools that will calculate the renewal, disposal, and gross valuation impacts of the works (at a per component level) remain unchanged.
Available to capture information as it occurs, or after the fallout.
In a perfect world, we would all capture information into relevant systems as events unfold. In the real world, this is not always (and often far from) what is possible. The good news is that the Metrix Asset Management system supports both methods of data capture. Information input by users can be set to occur as at today, or, backdated to a prior date (with appropriate protections around closed fiscal years).
Further to this capacity, the built in reporting engine can also export information as it existed at a point in the past. This overcomes the classic problem of having to have files lying around with filenames like “2023 final data _draft _final _v2”. The system will retain your history accurately, whilst permitting users to plan and operated in the present and future.
If you would like to explore how these features can help you through the end of year slog, contact us today.