The physical verification of fixed assets is vital to an organization as it ensures that their physical assets are accounted for accurately. In the pharmaceutical industry, the value of equipment, machinery, and other assets is high, and their maintenance too comes at a hefty cost. Thus this verification highlights its importance even more. Some of the basic reasons are the maintenance of accurate financial records, complying with regulations, and ensuring operational efficiency. But the question is, is the process of physical verification of fixed assets any different for a pharmaceutical company?
Importance of physical verification of fixed assets in pharmaceuticals
Before finding that out, let’s check why physical verification of fixed assets is critical in the pharmaceutical sector. To begin with pharmaceutical industry counts on precision and high-quality machinery to manufacture drugs and their safety has to be maintained as well. Therefore, if a discrepancy is found due to misplacement, damage, or theft, it can result in significant financial losses, operational delays, or regulatory fines.
Steps involved in physical verification of fixed assets
The process of physical verification of fixed assets operates with a systematic approach. Each step plays a vital role in ensuring the completeness and accuracy of asset records:
1. Asset Identification
It is the very first step; asset verification in a pharmaceutical company shall include specialized machinery, lab equipment, vehicles, computers, and office furniture. For convenient identification, each asset is tagged with an identification number or barcode for ease of tracking. The assets are also identified based on the asset’s details (such as model, type, and location) and they must also match with the records maintained by the company.
2. Physical Inspection
After the identification of the assets, a thorough physical inspection is conducted. In this direction, the condition of each of the assets is analyzed and also checked for their working order. Since pharmaceutical companies operate equipment that calls for high safety and quality standards, this inspection is particularly important. If equipment is in poor condition, it could lead to contamination or production failures; factors that can be critical concerns for drug manufacturing.
3. Reconciliation with Records
When the inspection of assets is finished, reconciliation of the records takes place which is the reconciling of the physical count with the company’s asset register. This is done to ensure that every asset listed on the records can be physically accounted for. The discrepancies that may occur such as missing or damaged assets, need to be investigated.
4. Maintenance and Calibration Checks
In the pharmaceutical industry, many assets need to be frequently calibrated, and their maintenance has to be done periodically to ensure they are functioning at peak efficiency. When the physical verification is done for the physical assets, the procedure needs to check that the necessary maintenance schedules have been adhered to. If all this process is skipped, it can lead to equipment failure or substandard production; both can have catastrophic results in a sector as sensitive as pharmaceuticals.
5. Reporting Discrepancies
After the completion of the verification process, if any discrepancies are found between the physical assets and the recorded assets, they must be reported at once. Some of the commonly occurring discrepancies pertain to missing assets, assets that are no longer functional, or differences in the recorded and actual condition of the assets. In the pharmaceutical industry, discrepancies are to be dealt with seriously and at the highest order as they can have a bearing on the industry’s regulatory framework itself. Thus, misalignment is not only a negative factor for financial books but also for regulatory actions.
How is the verification process different in pharmaceuticals?
While the process of physical verification of fixed assets is the same as any other industry, the pharmaceutical sector has its share of unique challenges. To begin with, the nature of assets is dynamically different and the equipment that is marked as physical assets is highly specialized and requires ongoing maintenance and calibration. Next, pharmaceutical companies are obligated to adhere to strict regulatory guidelines, meaning any discrepancies or failures in equipment could lead to penalties or product recalls.