Equipment Appraisal Blog | Understanding Machinery Appraisals

How appraising industrial equipment helps improve your company's bottom line

Posted by Equipment Appraisal Services on Tue, Jun 12, 2018 @ 12:32 PM

When your company deals with serious machinery, it's important to know its value for insurance and tax purposes, right? Actually, there are a number of other reasons why appraising industrial equipment assets can help improve your company's situation, flexibility and adaptability in the marketplace. Here's a quick look at how you can use your equipment values to leverage everything your business has to offer, allowing you to improve your position in the market.


How appraising industrial equipment helps improve your company's bottom line

Whether you're processing materials, manufacturing products or otherwise have industrial equipment involved in your business, you know you've got a lot invested in your machinery. But is it really that important to know exactly what your equipment values are? After all, it's accounted for in your books through depreciation, which are based on commonly used tables, right?

Unfortunately, depreciation tables rarely provide an accurate representation of your equipment values. Why? Because they're an average amount of asset value loss over time, they tend to be overly generalized. Virtually every business has equipment that has been fully depreciated for years, yet that equipment continues to deliver value through its use on a regular basis. If that machinery were to suddenly fail, the business would suffer for its loss in terms of production, and an investment would need to be made in terms of new machinery, costing the company capital that it may have already allocated to other operations.

Most companies also have equipment that has failed before it has been completely depreciated. Whether it was a press that was expected to be used hard and abused to a certain extent for a particular project or machinery that has simply failed before it was fully depreciated, it will still show up on the books as having value, even though its only value is as scrap metal. These situations, where equipment has excess or lack of value in the books that doesn't represent real-world values, can create a false sense of your company's assets. This, in turn, can create serious problems when you use those bad figures for securing loans or as a basis for expanding the company's operations.

What about market conditions? When you depreciate a piece of equipment, you have an expectation that the depreciated value may reflect current market demand for that machinery. But when the market is growing, that equipment may be worth more than its depreciated value. This can be problematic when a piece of equipment fails and you base the replacement cost on the depreciated value of the equipment. When this happens and the market is strong, you may have a difficult time finding the machinery you need at the price you expect. Conversely, when the market is poor, you may have a hard time finding a buyer at a higher price point. Machinery appraisal helps provide you with an accurate assessment of the equipment's real value.

By taking the time for appraising industrial equipment, you can learn a great deal about your machinery's condition, performance and value. This, in turn, allows you to leverage that value and condition to your company's best possible benefit and growth. But how do you start the process of having your industrial machinery appraised? Start by finding a certified equipment appraiser who has experience with your industry's machinery. Certification ensures that the appraiser knows exactly how to determine your equipment's value for your specific situation.

Tags: industrial appraisal, appraising industrial equipment