Inflation is an imprecise and unpredictable force of economics. Rising costs in the prices of goods and services can change rapidly or slowly, depending on other economic forces at play. Not accounting for and calculating inflation is likely to impact your business in negative ways. The biggest impact it will have on your company is that you will essentially lose money.
Dollars don’t have the same purchasing power as they did even five years ago. No one knows exactly why inflation happens, but there are several reasons for it. Demand for goods and cost of production rising are some of the biggest reasons behind inflation, but they aren’t the only explanations. Whatever the reason, your company can’t afford not to account for inflation rises each year.
Calculating inflation and depreciation is a tricky thing. You have to have a good estimate of how much inflation will go up, how long you expect your asset to last, and what it’ll cost for you to maintain your asset in the meantime. Trying to calculate this on top of other asset tracking issues can seem impossible, but not putting this into your asset finances will give you an incorrect view of potential profit.
However, by taking the time to calculate inflation, you can be sure that your money will go as far as you need it to go. Acquiring fixed assets now before inflation rates change will help your company to save later on down the line. Knowing what kind of inflation to expect can help your business figure out if you need to increase revenue streams, and how to allocate your budget in the most effective manner. This will help you protect your assets, and keep your finances in order.
Tracking asset depreciation can also help your company plan for financial success. Depreciation is used in accounting to track and allocate the cost of a tangible asset over its life cycle. The costs of these assets can be deducted from business taxes, but they must be depreciated accordingly. Tracking asset depreciation can help companies see how long assets are financially feasible to maintain, and when they should be replaced.
Calculating inflation, depreciation, and appreciation values doesn’t have to be difficult. Asset Panda has created a feature that calculates all of this based on the assets you select. The program uses the straight line depreciation method to help users calculate potential inflation increases. This method of accounting for depreciation gradually reduces the amount a company can put on its books for an asset, which helps keep track of asset use over time.
Using this feature can also help you project what it’ll cost to replace your assets in five, ten, or twenty years. You’ll be able to see the cost reflected in modern day currency, instead of just the inflated amount it will rise to when the time comes to replace it.
Asset Panda’s cloud based software helps many companies compile their accounting records so that they have a more accurate picture of their finances. Our program helped NEXCLEAN save time on data entry, and receive real-time feedback to provide information about customer assets as they were being cleaned. This helps their company provide better and more efficient service, increasing their bottom line.
Want to check out Asset Panda’s inflation formula feature for yourself? Take a free guided tour today!