Tools and Technologies for Better Asset Management
While April celebrates the start of spring, it also marks the end of tax season — which, while not as flowery, is worth acknowledging. Before we give tax season its official goodbye, we’re tackling a tax-related topic — fixed assets. Stifle that yawn. Fixed assets are dynamic and vitally important to your business’s success. Here’s a helpful overview of what they are, why they matter, and how to best track them.
What are fixed assets?
Fixed assets are long-term assets your company owns and uses to generate income. They are generally not intended for resale and are expected to benefit your company for more than one year. Fixed assets are also known as non-current assets, capital assets, or property, plant, and equipment (PP&E). Examples of fixed assets include buildings, machinery, vehicles, furniture, land, and equipment.
Interestingly, intellectual property, copyrights, and trademarks can also be considered fixed assets. But when most of us refer to fixed assets, we’re talking about things we can see and touch.
Why careful tracking of fixed assets is essential
Fixed assets represent a significant investment for your business. They are (typically) expensive and usually play a crucial role in your operations. There are two primary reasons your organization should carefully track its fixed assets. The first seems obvious — so you know what you own. The second reason is that the IRS requires that you do.
There are many other benefits resulting from careful asset tracking, including:
- Accurate financial reporting
Fixed assets are significant investments for your business, and their value impacts its financial statements. Tracking fixed assets allows your company to provide accurate information about its financial position, profitability, and cash flow.
- Compliance with accounting standards
Accounting standards require that companies report fixed assets accurately in their financial statements. Accurate tracking ensures that you are in compliance with these standards and avoid legal issues.
- Tax reporting
Fixed assets are subject to depreciation, which can reduce your company’s taxable income. Accurate tracking ensures that the company can claim the correct amount of depreciation and avoid any issues with the tax authorities.
- Efficient resource management
Fixed assets require maintenance, repairs, and replacements, which can be costly. Proper tracking allows a company to identify assets that you are not using efficiently, are underutilized, or require maintenance, allowing for better resource management and reducing unnecessary expenses.
- Better decision making
Tracking fixed assets provides your company with valuable information you can use to make better decisions. For example, knowing the age and condition of an asset can help you decide whether to repair or replace it or purchase a new asset altogether.
How to track fixed assets
Smaller businesses often start out using manual record-keeping methods, such as spreadsheets, to track their fixed assets. This method may work well enough for small businesses with a limited number of fixed assets. However, maintaining spreadsheets is time-consuming and error-prone.
The best way to track your organization’s fixed assets is through an asset-tracking application. If you’re ready to improve your organization’s ability to track its assets, here are some steps to consider to get you started:
Identify all fixed assets
Companies should create a comprehensive list of all their fixed assets, including the type, location, serial number, and purchase date.
Choose an asset-tracking system or software
Several options are available, including barcode scanners, RFID tags, and cloud-based software. The system choice will depend on the company’s needs, size, and budget.
Assign unique identifiers
Each fixed asset should be assigned a unique identifier, such as a barcode or RFID tag, to make tracking easier.
Regularly update asset information
The asset tracking system or software should be regularly updated with any changes to asset information, such as maintenance schedules, location changes, or disposal.
Conduct regular audits
Companies should regularly audit their fixed assets to ensure all items are accounted for and in good condition.
All employees who handle fixed assets should be trained on the asset tracking system or software to ensure they know how to update information and properly use the system.
By implementing a comprehensive asset tracking system, companies can better manage their fixed assets, reduce the risk of loss or theft, and ensure that assets are properly maintained and disposed of when necessary.
Let’s fix it
Fixed assets are a crucial component of your business, and tracking them carefully is an essential best business practice. As a Sage customer, you have a highly robust and affordable option, fully integrated with Sage 100 and Sage Intacct, to streamline fixed asset tracking within your organization. Contact us to learn more about Sage Fixed Assets.