Livin has been using Orchard’s Fixed Assets software for its property and asset portfolio alongside general ledger integration for component accounting and FRS102 compliance, saving at least £600,000 in the process.
Livin was originally using spreadsheets to manage its property portfolio, but with so many spreadsheets in use, the process had become very time-consuming and meant it was difficult to find specific information.
As a result, added pressure was then placed on Livin’s finance team because contractual agreements meant that invoices had to be paid within three weeks. The delay in reviewing improvement scheme information sometimes led to the finance team making a certified payment without a supporting detailed list of information. Although payments were certified by Livin’s surveyors, the detailed information wasn’t always available for finance to review.
Livin decided to automate this process with Orchard’s Fixed Assets solution. This supports the recording of all assets, including components if needed. Fixed Assets is integrated to Livin’s general ledger for depreciation posting and to accounts payable and receivable for the addition and disposal of assets.
Despite buying Fixed Assets in 2009 at the same time as Livin bought OpenAccounts, their use wasn’t considered until 2012 when the finance team challenged the payments to contractors without adequate detailed information.
Livin found that assets could be depreciated regularly and disposals dealt with on a day-to-day basis, while component capitalisation and other additions could be done when a scheme was completed. It was decided that this would work well for new development schemes but improvement schemes would continue to be analysed into their components and added to the asset register at year end.
Upon reconciliation, the finance team found it difficult to accurately depreciate, dispose and add asset information. External auditors had also suggested that Livin was ‘too reliant on complex spreadsheets’.
Matthew Wilson, management accountant, Livin, said, “The implementation was a challenge because the previous three years’ worth of spreadsheets needed to be added into the system. We also had to create and implement the coding structure for each type of fixed asset journal.”
“As part of the implementation, we undertook an exercise to compare the old process to the new one and found that the new process using Fixed Assets had both time- and money-saving benefits.”
In order to design and implement the coding structure within the Fixed Asset module, Livin used the module’s test system as a ‘sandpit’ to create, depreciate, revalue, impair and dispose of assets to observe their behaviour and understand the background processes.
As part of the stock transfer agreement with Durham County Council, Livin entered into a ‘VAT shelter’ agreement. A percentage of recovered VAT goes to the council, but Livin still makes significant savings from this with help from the Fixed Assets module. Through accurate component lifecycle analysis and with capitalising component replacements excluded from the improvement schemes, Livin calculated that between 2009 and 2017, a total of around £600,000 has been saved in VAT alone.
The new process also coincided with Livin’s implementation of component accounting, meaning that depreciation and other property maintenance elements are now tracked efficiently and accurately. Information can be consolidated when necessary, but can also be analysed separately in smaller segments.
Wilson estimates that it now only takes him around the equivalent of one working day per month to manage and reconcile Livin’s fixed assets, and the annual capitalisation process, although taking a week or two, is now is smooth and efficient, saving resources during a very pressured period, while also returning very accurate reporting data.
When FRS102 was introduced, Livin had to remove all grants from its asset base and recognise them as a separate liability. This led to not only an increase in the asset base but also a new liability to recognise and amortise them at the effective rate. However, because Livin had already implemented the Fixed Asset solution, these components were set up as a liability within the solution and amortised along with the depreciation of fixed assets.
Wilson said, “We are delighted that the Orchard software has made such savings over the nine years since our stock transfer. We will continue using all that the solution has to offer to ensure accurate and efficient management of our financial information. I can see that after investing in the right solution originally, it has paid considerable dividends.”