Equipment Appraisal Blog | Understanding Machinery Appraisals

How a Heavy Equipment Appraisal Gives You a "Grade A"

Posted by Equipment Appraisal Services on Tue, Nov 29, 2016 @ 08:30 AM


When you work in grading, working with heavy equipment is just part of the process. But what are your equipment values? Many businesses determine their equity based on tax accounting records, which may not give you an accurate picture of your equipment's value. Smart business owners turn to heavy equipment appraisal services to get the real value of their heavy equipment. Here's why:

How a heavy equipment appraisal is Helpful in Your Business

First off, let's take a good look at where tax accounting isn't helping you get the best out of your business. Tax accounting is focused on getting you the best possible results for your tax return. In most cases, this involves trying to lower the tax liability of the business as much as possible. Because it covers a wide range of industries and businesses, tax accounting is focused on what most businesses face rather than specific industries and businesses. For example, machinery is reduced in value using a depreciation table. This may not reflect the actual value of the machinery, just how much it is expected to lose value according to a table developed by the tax agency.

We've all seen heavy equipment that has been gently used and well cared for, resulting in a machine that continues to perform long after it has been completely depreciated. That equipment is an asset that still has significant value to the business owner, no matter what the tax tables say. Equipment appraisals do a great job of helping businesses recapture that hidden equity that isn't apparent in a tax return. The appraisal report provides you with legal proof if you need to make an insurance claim for a higher value than the adjustor is willing to pay without further proof. This type of documentation is also accepted by virtually every financial institution, because a certified equipment appraiser is able to document the standardized methodology and sources the appraiser used to calculate the value of the machinery.

What about the other side of the coin? We've all worked on sites that were absolute murder on equipment. Unless a machine appraisal is performed, your tax return will reflect a much higher amount of equity in that asset than may be realistic. It's bad enough knowing that the equipment will probably not last nearly as long as you had hoped when you bought it, but having to pay taxes on a false level of equity because a tax table dictates the machine's depreciated value is even worse. Because a machine appraisal from a certified equipment appraiser holds up to scrutiny and uses standard methodology to determine value, the report will stand up to serious scrutiny in court or during an audit.

By getting a heavy equipment appraisal, you're ensuring that you know the right value for your grading machinery. That will help you make good business choices, because you'll know whether you're negotiating from a position of strength or weakness, and whether that new investment is a good idea or a big risk. But are you working with an experienced, certified equipment appraiser? Using a certified appraiser ensures your machinery valuation will hold up to scrutiny in financial, legal and insurance circles.

Tags: construction equipment appraisal, heavy equipment appraisal

What is Inspected During a Plastic Molding Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Nov 22, 2016 @ 10:00 AM


If you work in plastics production, you know that the condition and value of your equipment is vital to your company's bottom line. But how do you prepare for a plastics equipment appraisal? Is your molding or extrusion equipment selling in the market? What will the equipment appraiser need to look at during the process? Though the process can seem very complicated, knowing what to expect ahead of time makes it much easier on all involved. Here's a quick look at what happens during the process and what kind of access the machinery appraiser will need to successfully complete the inspection quickly and accurately.

What is inspected during a plastic Molding equipment appraisal

  • Can the machinery appraiser easily access the machine and remove any panels to inspect the inner workings? Because the appraiser needs to see the machine and its inner workings, the entire machine be accessible. Clear away anything blocking access to the machine. If the machine is being actively used in production, you may need to schedule the appraisal during times when the production line is down.
  • How does the amount of usage of the equipment compare to similar equipment used by other companies? If it's been used for fewer hours than similar machinery, it will probably be valued at a higher rate. If it has higher hours, the value will probably be lower than comparable machinery.
  • Has the equipment been properly maintained and repaired as needed? Though this can sometimes be apparent by the condition of the machinery, a better bet is to provide access to any maintenance and repair logs or receipts from maintenance and repair parts, supplies and equipment.
  • Is the machinery manufactured by a popular company or an unknown one? If the machinery is well known in your industry, it is probably more in demand and will have more parts readily available. This will command a stronger value than an unknown manufacturer.
  • Are parts readily available to repair the machine, and are they original parts from the manufacturer or generic replacements? As with the prior question, a well-known manufacturer is more likely to still be and remain in existence with parts available from the machine. Generic parts, though they may work, may not properly interface with all the machine's functions, making it more difficult to operate.
  • Has the equipment been abused or neglected? This is a very important part of the process. Abused or neglected machinery will have a lower expected lifespan and will probably have additional parts fail due to extra wear and tear from a neglected repair.
  • Does it have any options or kits added that are produced by or approved by the manufacturer? These types of additions increase the value, but kits added that are not approved by the manufacturer may decrease the value if they put additional strain on the machine's systems or compromises safety.
  • Can the machinery be operated so the equipment appraiser can view it in action and see what it produces? Sometimes the easiest way to discover a machine's shortcomings is to see whether it is producing quality plastic pieces and how it moves under production.

By knowing what is being inspected when you're having a plastics equipment appraisal performed at your business, you better know what documentation to have on hand and what the equipment appraiser will need to access to complete the machinery valuation.

Tags: plastics equipment appraisal, molding equipment

Benefit from Your Equipment Donations: Why a Machine Valuation is Vital

Posted by Equipment Appraisal Services on Tue, Nov 15, 2016 @ 02:00 PM


When you're considering making donations to community or charitable organizations, it's really easy to get caught up in the great feeling that you're doing something wonderful in the world. Unfortunately, many business owners or managers don't fully consider the legal and financial ramifications until after they've completed the donation process. Here are a few reasons why you should always get equipment appraisals before making that donation.

Benefit from Your Equipment Donations: Why a Machine Valuation is Vital

Get a better picture of what you're donating.

Sure, you saw something similar go at auction for about $5,000 last month, but was it really a comparable piece of equipment? Maybe the charity you're working with "knows a guy" who can provide an estimate of value for your receipt. Unfortunately, if you don't have a certified machine valuation, you don't have legal proof of the donation's actual value in many cases. When it comes time to split up a company or deal with an audit, you may be accused of intentionally dumping the company's assets instead of having to split them or pay taxes on them.

Provide documentation of donations to the charitable organization.

Many charitable organizations work with donors who will provide additional funding or matching funds once a particular goal has been met. Instead of providing them with a piece of machinery with an assigned minimum value, wouldn't you rather provide them with the actual value so they can take advantage of what those donors or matching foundations have to offer? Having a certified value gives you and the charitable organization more flexibility in what you do with that equipment appraisal.

Have that important piece of paper when the IRS comes knocking.

Every business owner dreads the possibility: the IRS audit. If you've made a donation of valuable equipment but don't have legal proof of its actual value from a certified machinery appraiser, the IRS can accuse you of dumping assets to lower your tax liability. Unfortunately, this is because companies have done this in the past. If an oil company has a banner year and knows they need new equipment, they can donate the old equipment to show a loss of assets before investing in new equipment in the new year.

If you've already donated, it's not too late to get an appraisal!

Have you already donated that equipment? Don't panic! There are legal methodologies that allow a certified machine appraiser to provide you with a backdated value for equipment that has already been donated. This type of appraisal will take into account market and industry conditions at the time the donation was made, allowing you to take advantage of the tax benefits of your donation without the risk of an IRS audit or of undervaluing your equipment. A past donation like a powered electric wheelchair to the ALS is something that can be handled through this process.  Make sure the appraiser is a Qualified Appraiser in the eyes of the IRS and that they regularly sign off on IRS 8283 forms. 

Now that you know what to expect, make an appointment with a certified equipment appraiser before making donations to that wonderful 501c3 that you've been wanting to help along. By knowing your equipment values and having a certified machine appraisal in hand, you're ready to make a change for the better in our world while documenting exactly what has changed hands.

Tags: machine valuation, equipment donations

How an Industrial Equipment Appraisal Helps Reduce Business Risk

Posted by Equipment Appraisal Services on Tue, Nov 08, 2016 @ 10:30 AM


When your business involves industry, it can be difficult to operate without excessive risk. A change in your electricity rates, a supplier goes out of business, an employee gets hurt on the job and you have to cover OSHA fees: all these issues can cause a drastic change in your overhead expenses. One area that is often overlooked is your equipment. How do you know exactly what your equipment values are? If you don't know, how can you make intelligent decisions about your business that won't expose it to risk? One tool many business owners use is an industrial equipment appraisal.

How an industrial equipment appraisal helps reduce business risk

Did you know that your industrial machinery can have more than one value? How do you know which one is the right one? Some business owners go with depreciated value on the tax records, but that doesn't provide an accurate value for the 20-year-old pump in your factory that was fully depreciated ten years ago but still continues to function day in and day out. It could be that you have equipment that has not been fully depreciated yet but had to be used hard during a crisis and is in imminent danger of failing prematurely. Using tax accounting records to determine machine value can make it impossible to operate your business effectively.

If your equipment is overvalued, you may offer it as collateral for a loan so you can take advantage of a fabulous new business opportunity. But what happens when the opportunity falls through and you're on the hook for more than your equipment is worth? If it is undervalued, you may be reluctant to take advantage of an opportunity that would lead to significant growth for your company. How do you know which way to go at that point?

Many entrepreneurs use a machine appraisal to get a better idea of what their assets are worth in the real world. Quality equipment appraisals deal with issues such as expected remaining useful life, giving you an idea of how long the equipment may last before it needs to be replaced. It looks at market conditions, and whether your equipment is in demand or if there are already too many pieces of similar used equipment on the market that are driving the prices down. It will consider whether the equipment can keep up with rising trends, such as integrated sensors and reporting that is quickly becoming the norm for new products. 

What about your equipment's location? If it took some serious work to get it in place, it will take serious work to remove it if it is sold. A good machinery appraiser will take that into account when calculating the equipment's value. What are the circumstances for the appraisal? The court may require a particular type of appraisal methodology in divorces or hostile partnership breakups. All these aspects are taken into account when  you work with a good machinery valuation specialist.

By having an industrial equipment appraisal performed, you can avoid much of the risk prevalent in many industrial businesses. But before you hire just any appraiser, it's important that you find an equipment appraiser who is certified to ensure the machinery valuation report they produce will stand up to scrutiny.

Tags: industrial equipment appraisal, business risk

Using an Equipment Appraisal when Preparing for Potential Sale of Equipment

Posted by Equipment Appraisal Services on Tue, Nov 01, 2016 @ 01:30 PM


When you're in business, you need to have a good idea what your bottom line is. This can be for many reasons, whether it's getting financing from the bank, correcting your books to reflect actual assets and equity or the potential sale of equipment. You need to know exactly what your equipment is worth to ensure you're getting a fair shake no matter the circumstances. But equipment appraisals can be especially helpful when you're getting ready to sell a used piece of equipment. Here's why:

Using an Equipment Appraisal when Preparing for Potential Sale of Equipment

When many businesses get ready to sell a piece of equipment, it can be for a number of reasons. It could be that the equipment is not right for the business. Maybe it's just too much or too little to work well for your operation. Another reason is that it has zeroed out in depreciation by tax accounting records. But that doesn't mean that the machinery has no serious value. When you're dealing with having to sell equipment to buy out a partner or finance a new investment, you may not know which equipment will get the job done with the least impact on your business. In all these situations, having a quality equipment appraisal performed helps ensure you get what your equipment is worth.

If you purchased a metal lathe that just isn't able to keep up with production, it's easy to undervalue it when you're selling. You may do the opposite when trying to sell a piece of equipment that is overwhelming your operation. A good equipment appraiser isn't looking at the problems this equipment is causing in your business, he or she is seeing the potential it has in other businesses. That lathe may be too small for your operation, but it's perfect for a company that does small, precision-machined components. The too-big excavator may overwhelm your construction site, but is perfect for a quarry that needs to improve production. The equipment appraiser will base the value on what's happening with that equipment across industry and help you find a fair price.

Depreciation is typically based on a pre-determined schedule laid out by the tax agency you're responding to. If you have quality equipment that has been lightly used and is in good condition, it will often have a value much higher than its depreciated value. Standardized tables and schedules don't work well if your equipment is either well cared for or poorly maintained.

When you need to sell to keep your business afloat, a quality equipment appraiser can look at your entire operation and determine which pieces of equipment should be sold to meet your obligations. Instead of having an emotional attachment to the original equipment you ordered when you opened doors, they can see that the same equipment is creating production bottlenecks or isn't able to provide the results you really need anymore. Knowing which pieces will make the difference is often all the difference between succeeding in a liquidation and closing the doors forever.

By knowing the machinery valuation, you can make sure you get a fair price for the potential sale of equipment.

Tags: equipment for sale, selling equipment, used equipment