CIP / Capital project accounting

Expanding, Remodeling, Building New: CIP Accounting / Capital Projects

Construction in progress accounting for fixed asset management can have many names, but in the end, it’s all the same.  Tracking all costs associated with incoming ‘pre-fixed assets’ during your capital project.  These can include both, intangible and tangible assets.  Either way, they all need to be properly tracked, organized and accounted for.

Time and time again, I have witnessed assets getting missed when transitioning the finished project into the depreciation sub-ledger for fixed asset accounting.  Moreover, invoices and payments don’t get reconciled back appropriately.  What I don’t like to see, and nor should you, are assets that get placed into service out of CIP Accounting into fixed assets as bulked items.  Especially for remodels.  It seems, when there is no automated system in place,  and a ‘template’ is used (aka: spreadsheet – new or legacy) instead, all line items get slapped together.  This could be a huge problem when determining bonus, Section 179, 1245 vs 1250 property – and can I also mention property tax reports?  I see this all the time.

Everyone has capital projects throughout a year.  Some more than most, yes.  But they should all be better organized, automated, and integrated.

My Top 5 Industry Picks

  1. Hospitality: hotels, theme parks, cruise ships and more!  All have an enormous amount of fixed assets and a great deal of capital projects.  New location builds, remodeling, additional amenities and other structures.
  2. Gaming / Casino: not only do they own their fixed assets, but they also deal with a lot of leased equipment.  Either, they lease it out for other locations or kiosks, or they lease it from the manufacturer – these can also be tracked and kept into CIP accounting until they get moved, plugged in and booted up. Not to mention all of their amenities within that have their own projects.
  3. Restaurant / Grocery: also have remodels, leased equipment, ‘refreshes’ and other items that go out overnight and need to be replaced ASAP.  Wouldn’t it be awesome if you could pull up all the maintenance and original purchase order information quickly.  Or at the very least, obtain a report that provides the original payments and vendor details on the fly?  No, excel does not do this.
  4. Retail: perhaps one of the most exciting industries!  So many assets moving from here to there… from one project to the next.  Refreshes for branding stores.  Leasehold improvement projects for new stores.  Way too much project activity for a spreadsheet or ‘template’.
  5. Manufacturing: sometimes machinery & equipment will be tracked within CIP accounting, not just new buildings.  Or swapping out/upgrading legacy equipment to a new solution.  Regardless, this can turn into a CIP mess as well, if not done appropriately.

CIP Accounting has other uses as well.  When fixed assets get entered into the AP/PO system, they are entered in by their invoice.  The information on an invoice doesn’t always get translated appropriately over into the fixed asset accounting system.  To introduce better workflow, a CIP accounting system can be implemented to work as a ‘fixed asset catchall’.  This allows the fixed asset manager to review, update, breakdown, and fill in the missing information (and better asset descriptions) needed to control what moves to the fixed asset accounting sub-ledger, and to which account it should be assigned to, prior to being placed into service.

Now that 2018 is upon us and capital budgets for the year have been set, make sure that you are ready to tackle your capital projects the right way, automated and integrated with your fixed asset accounting system.  This will provide you with more organization, efficiency, control and more importantly, insight into your projects.

For more information, feel free to reach out to me at angie.chase@swktech.com or give me a shout by ringing me up at (973) 805-3342.  I LOVE to talk all things fixed assets, but I’m a good listener too.