If the fixed assets are the long-term tangible properties that you own and that you use in your operations to generate income, we are sure that you will be interested in knowing What is Fixed Asset Management? Above all, because you need your fixed assets are not consumed or converted into cash at least a year from now.
You can also call your fixed assets as capital assets, property, plant and equipment, and those present on your company’s balance sheet are generally expected to be below current assets.
It is an exciting topic and very profitable for you … continue to delve into it!
What are Fixed Assets?
We will start by telling you that fixed assets are all the assets of your company, whether they are tangible or intangible. It is key that you do not let them become liquid in the short term and that you understand that they are normally necessary for the operation of your company. Because you should not use them for sale.
Here are some examples of fixed assets:
- Property
- Machinery
- Office supplies
Keep in mind that any investment you make in fixed assets will represent a significant cash outlay for your company and that it will generally represent a long-term financial commitment. Hence, it is important that you consider the useful life and depreciation of the fixed asset before any decision or business or investment strategy.
Types of Fixed Assets
Now we will tell you what are the types of fixed assets:
- Net: they are the ones that will appear in your financial records at their original value or cost, subtracting accumulated depreciation and any charge for impairment. You should know that, due to ongoing depreciation the net worth is always decreasing.
- Accounts: here will be the long-range assets that you should reflect in your accounting records because they influence capital and incorporate the purchase, revaluation, devaluation and sale of fixed assets. The purpose is for you to know their overall value to understand not only what fixed assets you own, but also the value of each individual asset.
- Tangible: they are represented by buildings, land, hardware, various equipment, vehicles, furniture, among other goods. It is everything you need to stay in business.
- Intangibles: here you can incorporate the goodwill, licenses, names or registered trademarks. Even the phone numbers, any innovations and websites, that you ever plan to sell.
What is Fixed Asset Management?
We want you to know that the administration of fixed assets is the possibility that you can develop to make correct use or due control over your assets, so you save money and time. Also, you can see it as an efficient way to prevent theft, plan future maintenance and replacements.
In the same way, this activity is key for your company because it will help you to be clear about the direct impact of the management of your assets in the calculation of taxes. If you do not have adequate and correct accounting, your company may suffer sanctions; And if your financial information is inaccurate, you will make bad decisions and wrong strategies.
The goal of fixed asset management is for you to have accurate and timely information as to:
- The maintenance and updating of all the information required on the Fixed Assets (code, date of incorporation, model, serial number, supplier, location, person in charge, etc.).
- The generation of the identification code of the new assets that you incorporate.
- The creation of the monthly amortization entry by fixed asset item.
- The detailed monthly report of registrations and cancellations for the period.
- The periodic reconciliation of the Fixed Assets information with the balances of the accounting items
- The Fixed Assets table, in main currency and conversion currency.
- An inventory of assets detailing all the information related to each of the Fixed Assets items
- The projected amortization report for a stipulated period of time
How to Manage Fixed Assets?
We need you to know that the management and / or administration of your fixed assets is a methodological process. Its central purpose is that you have a qualitative and quantitative database of each of your fixed assets, accurately and reliably based on the following steps:
- Informative Asset Survey and Physical Inspection
- preparation of the accounting list with documentary support
- Reconciliation of physical inventory – accounting
In order for you to manage your fixed assets efficiently, it is necessary that you take into consideration the following elements:
- Location or place of each fixed asset.
- Amount of fixed assets that you have to know their state of natural wear and tear to be replaced.
- Condition of the goods so that you have a correct planning, avoid theft, know when it is your turn to change them and not fall into last minute decisions.
- Preventive maintenance programs to extend the useful life of your assets and prevent damage that harms your business.
Why is it Important to Manage Fixed Assets?
So far we have shown you the main concepts and key elements for managing fixed assets. In this section we want to leave you some of the reasons to convince you about its importance for your company:
- Facilitates procedures. Fixed asset management gives you the opportunity to have more control over your assets. You will be able to know exactly where they are, how they are used and when they have been repaired.
- Offers security in calculating depreciation. You can use fixed asset management to guarantee accuracy in the calculation of amortization and depreciation, since you will have the entry and exit dates, the acquisition price and the useful life organized.
- It reinforces the reduction of costs. With the preventive maintenance of your fixed assets you will achieve a very important factor in reducing costs. If you plan properly, keep an effective control and develop a maintenance plan, you will increase the useful life of your assets.
- Detect «non-existent assets» through an inventory of fixed assets. This inventory will help you detect faulty or unused items that can be repaired, relocated, or sold, so they can be returned to your company.
- It reinforces the reduction of thefts. It is necessary for this that you control what you do not know you have. That is, the assets that have possibly been stolen from you.
All these elements can become a very complicated task, if your company does not have precise control of its assets through tools and technological systems. You will hardly notice the disappearance of items of lesser value, or those that are owned in large quantities, if you do not keep these records.
On the other hand, if you achieve a correct management of fixed assets, you will be able to detect all the disappearances of fixed assets, create methods to recover them and prevent incidents from recurring. It is about your company implementing the best of fixed asset control systems.
Examples of Fixed Assets
We have already told you that fixed assets are all those tangible and intangible assets that you require for the operation and benefit of your company. And the fundamental: You acquired them with the purpose of not selling them in the normal course of the operation.
Therefore, everything that we have clarified about: What is Fixed Asset Management? To conclude this article, we will illustrate you with some examples of fixed assets and you will think about yours.
The classes that make them up are:
- Land, urban or not.
- Constructions in process.
- Own buildings and all kinds of properties that you own (buildings, premises, apartments, etc.)
- Installations and improvements to leased properties.
- Machinery and equipment: machines, industrial vehicles and tools necessary for the daily operation of your company.
- Teams of operation.
- Furniture and fixtures.
- Computer equipment.
- Transportation: all means owned by your company that are used for people, animals or merchandise.
- Controllable equipment.
- Leased or loaned devices.
You must be careful not to include an inventory item as a fixed asset. Remember that you bought them with the intention of reselling it directly or incorporating it into a product that you are going to sell later.
To clarify the difference between inventory items and your fixed assets a little more, we will give you some examples. If your business sells food products, your delivery trucks are fixed assets. If you build a parking lot in your company, the parking lot is a fixed asset. Don’t forget that the word «fixed» indicates that these are assets that you are not going to sell in the current accounting year.
You need to know that according to the Financial Accounting Standards, all of your assets must provide reasonably estimated future economic benefits for your company.
We are sure that you now have important information for the future of your business and its sustainability!
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