Equipment Appraisal Blog | Understanding Machinery Appraisals

Did you know that 25% of businesses that go through a disaster or loss never open their doors again? This is primarily due to insufficient insurance or not being able to prove the value of equipment and other items that were lost. How do you protect your business against this kind of unexpected problem? An equipment appraisal can go a long way towards ensuring you have sufficient insurance to protect against a loss or proving equipment value for an insurance loss settlement. Here's how:

Need an Insurance Loss Settlement? Equipment Appraisals Get You There

Determining Insurance Coverage

When you're buying business insurance, you want to make sure your equipment is being covered for its actual value. Why? Many people rely on tax return depreciation as a quick guide to machine value, but the actual machinery value may be much higher or lower than what the standardized depreciation value allows.

If it's overvalued, you may be paying too much for premiums while not receiving the full amount you've paid for during a loss. If it's undervalued, the insurance company may balk at paying you the full value during a loss because you didn't pay for sufficient coverage. A machine appraisal can go a long way to provide proof of value for your equipment and help you decide how much coverage you need to cover business losses during a fire, flood or other disaster.

Dealing with a Loss

But what about when your business suffers a loss? During that stressful time, you want to reach a settlement as quickly as possible so that you can get new equipment and get back into the swing of things. When you do have a loss, can you prove what your equipment was actually worth? Having proper documentation complete by a certified machinery appraiser available for your insurance company helps to prove the equipment's value and goes a long way in an insurance settlement. It ensures that you'll receive a settlement that is both accurate to your loss as well as speeding up the process. Why? Because a certified appraiser's report uses a specific methodology and approach to determine equipment value. 

But what if you haven't had a machine appraisal performed before the loss? Fortunately, appraisers are often able to go back in after a loss and determine equipment values at the time of the loss by taking a solid look at the condition of the machinery, the market at the time of the loss, any repair and maintenance logs that are still available and similar information. Because this type of valuation is difficult, you'll want to make sure the appraiser you're working with is certified, has experience in equipment appraisal and specifically has experience in post-loss machinery valuation. 

By having a machinery valuation performed before you have a business loss, you can make the insurance loss settlement process go much more quickly and smoothly. But when determining your equipment values, make sure you're using a certified equipment appraiser who has a certification in or significant experience in machinery valuation. Why? Because documentation from a certified appraiser holds legal weight and will hold up in court if your insurance company is reluctant to pay out.

When you're in the paving industry, you know exactly how cut throat and competitive highway contracts can be. From extra-early mornings spent monitoring the bidding process to figuring exactly how much it will cost to run the job down to the fraction of a penny, these low-margin, high-volume jobs can make or break your company. These jobs can make or break your company, between possible problems with suppliers and issues with financing the project. But how does machine appraisal fall into the picture? By having a paving equipment appraisal performed, you can determine the exact value of your assets and can leverage that value to procure better financing. You can also determine whether new paving machinery needs to be part of the bid you're placing. Here are the details:

How a paving equipment appraisal helps when bidding highway contracts

• Insurance costs: When every penny counts in your bid, being able to have completely accurate insurance costs helps you make a win both in terms of the bid and in your business. Knowing exactly what your equipment is worth means that your insurance agent can completely customized your insurance policy to cover the actual cost of replacing the equipment, instead of paying a higher premium based on inaccurate numbers or ballpark figures. When pennies count, lower insurance premiums are a must.
• Collateral for loans: Highway projects can be big - really big. Because they go so much further in terms of material and labor than most other types of jobs, they can often overrun the average paving company's working capital. To make sure you can leverage every possible asset, having a machinery valuation performed helps provide proof of the exact value of your assets. Knowing exactly how much you can leverage to make the job happen can be all the difference between a highway contract that's well within your comfort zone and one that's just out of reach. This can help keep you from getting into trouble because you didn't properly estimate your equipment values and ran too much risk during the project, putting your business in danger.
• Fines for delays: Nobody likes waiting for road construction to get done, which is one of the reasons fines for delays in completion can be so steep, especially in fast track projects. One of the areas where a quality machinery valuation makes all the difference is in determining expected lifespan of your equipment, allowing you to purchase your new equipment ahead of when its needed or avoid the extra purchase all together if the equipment valuation specialist determines that your paving machinery should be able to make it through the job without any major problems.
• Avoiding legal issues: If something goes wrong, having a quality equipment appraisal performed ensures that you have proof of your equipment's condition before the trouble started. If the state or another contractor is claiming that there were problems with the job because your equipment was substandard, wouldn't you like to have the paperwork on hand to prove them wrong?

By keeping these benefits of a paving equipment appraisal in mind when bidding your next big highway contract, you can ensure that your company is still making a profit and not risking losing everything due to failing equipment, excessive costs or insufficient capital. If you need to have a paving equipment valuation completed on your paving machinery, contact a qualified and certified equipment appraiser department. We've been providing quality equipment appraisals for years and are happy to help you make your business everything it can be.

Whether your business is moving up a floor or downtown, your business assets can easily become lost or damaged during a move. Tangible personal property appraisals can protect your possessions from moving-related loss or damage. Learn what these appraisals are and why you should have an equipment appraiser perform a tangible personal property appraisal before a business move. 

What is a Tangible Personal Property Appraisal?

Originally a tax term, "tangible personal property" refers to any piece of property that can be picked up and moved. Your reception area furniture, business printers, and specialized tools all count as tangible personal property. Appraising tangible personal property can set equipment values for insurance purposes, depreciation, and amortization.

While any piece of tangible personal property can be appraised, it may not make financial sense to have a machine appraisal done for every item your business owns. An equipment appraiser can focus on setting the value of costly pieces of equipment, machinery, and furniture over inexpensive items like office decor or hardware.

While there are many use cases for hiring an equipment appraiser, a move is an often overlooked reason to have tangible business property appraised. 

Why to Hire an Appraiser Before a Move 

If you are working with a moving company on your upcoming relocation, they probably offer liability coverage to protect them from damaging or losing your items during the move. One of the biggest mistakes you can make is trusting that this coverage will be sufficient to protect your property. This type of insurance typically covers your things by weight, assessed value, or so-called replacement value of your items. Weight coverage values could be as low as $0.30 to $0.60 per pound, Allstate reports. In a worst-case scenario, a mover could misplace an expensive yet lightweight piece of optometry equipment and only have to reimburse your business $1.

If the loss of equipment would cause a disruption to your business and paying out of pocket to replace it would cause financial hardship, then we strongly recommend that you have a machine appraisal of your tangible personal property before your move. 

The appraiser will value your equipment, so you know exactly how much your fair market value your machinery commands. The appraiser can tell you how much it might cost to replace the optometry tool with a tool of similar value. 

Once you have the appraisal report, you can reach out to your business insurance provider and discuss covering your business assets for the purpose of the move. If something is lost, your claim will be subject to the deductible on your policy but otherwise you will receive money from your insurer to cover the cost of repairing or replacing your equipment. 

Before they can cover a claim, insurance companies want an outside opinion regarding the value of your equipment. When you have already done a machinery valuation, you can send them a copy of your appraisal report that certifies your equipment has a particular value. Getting the tangible personal property appraisal ahead of time protects your assets in case something goes wrong and gives you peace of mind during a highly stressful business move. 

Take the extra step now to protect your business assets with a personal property appraisal. Even if nothing goes wrong in the move, you will be glad to know that vital business assets are protected to their full market value.

When you run a business, there's always some risk to your investment. Being a wise business owner means you know how to recognize those concerns and how much of a risk they pose to your company. Though many business owners discount the value of shop equipment appraisal, it can be vital to your business' success or failure. Here are details on how that happens:

How Shop Equipment Appraisal Protects Your Investment 

• Providing documentation of value: If you need to document the value of your machinery, whether for financial documents, a loan to expand your operations or to disprove a high property tax assessment, a machinery valuation prepared by a certified equipment appraiser serves as legal proof of the value of your workshop equipment. Because a certified appraiser uses recognized, accredited methodology to calculate the equipment values, it will stand up to strong scrutiny from virtually any source, making it much easier to bring negotiations around to the actual value of your business and equipment, saving you time, effort and money in the process.
• Ensuring appropriate insurance coverage: When your business suffers a loss, whether it's from a fire, a natural disaster or a theft, your insurance company will require you to provide proof of value. The problem is that many businesses aren't sure of the value of their machinery at the time of a loss, due to changes in market conditions, depreciation and similar issues that are often dealt with in equipment appraisals. An equipment appraisal also ensures that you're carrying the appropriate level of insurance on your workshop equipment. If you have an appraisal from a certified equipment valuation specialist, it provides legal proof of value, minimizing the chance that you'll have to take your insurance company to court to collect the proper valuation on a loss.
• Ensuring correct depreciation: Many bookkeepers and tax accountants only depreciate your shop equipment and other depreciable business assets based on the federal tax code's schedule of depreciation. But what if your equipment is being heavily used and is no longer worth the amount shown on the depreciation schedule? On the other side of the coin, if you've spent good money investing in and maintaining quality shop equipment, it may be worth significantly more than the depreciated value, which is very important to the asset side of your balance sheet when you need to get a load for expansion, to prove value when selling equipment or for other business transactions.
• Helps protect against unexpected early machine failures: Part of the equipment appraisal process is estimating the expected lifespan of machinery. Though most appraisers can do a fair job of estimating this figure, equipment valuation specialists who work primarily on industrial equipment are far better at this than most. Because they deal with machinery on a daily basis, they can help you determine how much longer the equipment you have is estimated to last, making it much easier for you to start making plans to replace it when the time comes. Though this figure is not set in stone, it is a good gauge to help you plan for your business future expenses.

By having a shop equipment appraisal performed on your workshop machinery, you can ensure that your investment in your business is protected, no matter the exact risk at hand.

When we think about depreciation of an asset, we typically think about it based on a percentage, such as is used in tax accounting. But companies that have looked at equipment values over the years realize that a piece of machinery that has been fully depreciated on your taxes still has significant value in your business operation and can cost a lot of money to replace. In equipment appraisals, physical deterioration is a much more commonly used form of depreciation. Here's why:

How physical Deterioration is different than percentage-based depreciation

Because machinery varies so much in terms of lifespan, durability and reliability, it became much easier for the Internal Revenue Service to simply determine a set number of years over which a piece of equipment is appraised. But in reality, equipment that is well cared for may last many years, if not decades, beyond the point that it has been fully depreciated. By having a machinery valuation performed by a qualified equipment appraiser, you have a record of the equipment's actual value instead of what the IRS thinks it's worth.

Why physical Deterioration provides a better estimate of business assets

By comparison, a physical deterioration using the age/life ratio provides you with the best possible documentation that will hold up in financial, legal, insurance and tax office circles. If you  need financing for your latest project, being able to prove the value of all your assets beyond what's listed on your tax return helps you secure it. If you're dealing with a legal headache, you can document the condition of your machinery, proving that its not, in fact, worthless as the other side may contest. If you suffer a serious loss in your business, whether due to a fire, natural disaster or vandalism, you can prove the equipment values of replacing the equipment through your insurance company without any doubt as to the accuracy of the report.

But what about the flip side of the coin? If your equipment is losing value faster than the IRS depreciation tables, a quality machine appraisal provides you with quality evidence that you need to depreciate it more quickly. This can also hold true in terms of property taxes, where you may end up having to appeal your tax assessment because of a high appraisal that was performed based on standardized depreciation rates. A proper equipment valuation provides legal documentation of the equipment's actual value, allowing you to have your taxes lowered based on the lower appraised value and lowering your overhead.

By keeping track of your actual machine values through a quality machine appraisal, it's much easier to document the replacement value when you need it most. If you haven't found a company to perform a quality machinery valuation on your equipment, you could be leaving money on the table when it comes time for insurance policy renewal, financing for a big project or expansion or a property tax appeal.