So, what is managing your fixed assets all about? In short Fixed Asset Management helps you to track, protect and value your company’s assets. Fixed Asset Management is also a process by which accountants seek to track fixed assets for the purposes of financial accounting.
Fixed assets are usually long-term items that are purchased and add value to a small business. They are tangible, i.e., they are perceptible by touch. This could be a building, machinery, equipment, furniture, vehicles, IT and land. They have a useful life of longer than a year. You also have Intangible Assets which are things like Goodwill, Trademarks and Intellectual Property. These are harder to value and for the most part invisible.
In this article we will look at the Tangible Fixed Assets
Having a simple Fixed Asset Management Programme in place when your business gets to a certain size should always be considered. As all your company assets are a valuable part of your operation then a basic system to record and manage all the information associated should be adopted. This doesn’t have to be too detailed but the more information you can gather then the better.
Recording your assets on a Fixed Asset Register is one of the simplest ways, there are other methods you can introduce such as barcoded asset tags and the use of asset management software but for many small businesses this may be overkill.
Here are 10 things to record on your Fixed Asset Register
1. The original cost of the purchase.
2. The date it was purchased
3. The suppliers name
4. Quantity ~ Keep track of serial numbers if you purchase more than one asset of the same type. Over time it will become necessary to distinguish which asset you are tracking and reporting on.
5. Depreciation ~ It is usual to depreciate the value of the asset you purchased over several years. These figures are entered these into your books. You should engage with your accountant to work out which depreciation method is the most suitable for you.
6. Net Book Value. In simple terms the net book value is the cost of the asset minus the depreciation.
7. The location ~ If you have more than one location or you rent your assets out, then create a register to keep track of where they are and ensure they get filled in properly.
8. Maintenance ~ Keep this handy alongside any warranties when you buy a new piece of kit, pay special attention to the maintenance, I found it useful to put in a documented maintenance program for each purchase. In this way you really get to understand how employees should be looking after your asset and what to keep your eye out for. Ensure you note down any unplanned maintenance as it occurs, and any costs associated. This is invaluable when planning a replacement or justifying a new purchase.
9. Condition ~ What condition is your asset in? The more information you have the easier it is to plan maintenance or future purchases. It will help you if you ever come to valuing your business too.
10. ~ Residual Value. You may scrap it, or you may sell it to another business. Every asset has some residual value, sometimes it does not even cover the cost of disposal. Other times it can fund a deposit on a replacement.
Some of the information is just for you but a proportion of it should be discussed with your accountant. The sale of fixed assets should always be visible in your books. If you are looking to sell a business, you will need to include both Tangible and Intangible Assets in your valuation.
My last bit of advice is to always consult with your accountant as to what you are planning to do with your Asset Register. It’s better to be well informed and do it once rather than repeat the process. I always found the process useful and informative. It is amazing how much information gathers over an assets lifetime and almost impossible to remember each occasion where there was costly maintenance.
If you need help putting together your Asset Register, please feel free to contact me.