What are Fixed Assets and How do they impact your Business?
A fixed asset is something that is purchased for long term use and is not quickly or easily changed into cash. Your equipment, buildings, and property are all examples of fixed assets. For business and tax purposes, it is extremely important that you understand what your fixed assets are and what their value is. The challenge, of course, is that fixed assets are not always easy to quantify.
Factors that Go into a Fixed Asset Value Evaluation
Determining the value of a fixed asset typically varies based on three primary factors. These factors include when it was purchased, what purpose it serves, and whether it is leased or owned. A big concern is understanding depreciation and increased value through upgrades and repairs. Even though you can’t turn around and sell your fixed assets as quickly as you would sell gold or antiques, they do have value and they are often the parts of the business that financial lending institutions are going to be quite interested.
Two Easy Mistakes to Make
As a business owner, you must understand precisely what you own. You need to know how long you have had it, and you need to know how much it is worth. Many business owners make two very easy mistakes when it comes to fixed assets. They either make an estimate on how much their fixed assets are worth or they assume that it is just a matter of simple inventory and look at the amount they paid for it.
The problem with both of these is that insurance companies, lending institutions, and even the government would likely disagree with your estimate. Of course, they won’t tell you that if it works out in a way that increases the amount you owe them. However, if you underestimate it and they find out, they will be in for their share. When dealing with the government, you can also bet that there will probably be some additional fees and fines slapped on for good measure.
The Key to Your Fixed Assets
Managing your fixed assets starts with a good managing system through something like a fixed asset tracking software. Through this, you can enter in all of the data relating to your assets without having to worry about remembering it or digging it out of your files. Asset Panda is one of the best when it comes to making the process easy. You can track your repairs, upgrades, and any damage to your fixed assets. You can then run detailed reports; both from your desktop or from the mobile app.
Now, you might be wondering, what difference does it make if you use a fixed asset tracking software platform as opposed to just using a good old excel spreadsheet or just getting an expert in to conduct the evaluations. Well, you could do both of those things.
But you should be prepared to spend at least three times longer in preparing your reports. The other risk is that you won’t be able to keep it updated or even find it when you need it. It’s not always accessible either. Since Asset Panda keeps data secure in the cloud, you can get to it at any time you want from your mobile device through the free app. This way, you can update information from anywhere, at anytime.
As for paying an expert to come in and conduct evaluations on all of your assets, just remember that you will have to do it on a regular basis. Your fixed assets will change over time. They may increase or decrease in value. You will purchase additional ones. You will sell some of the old. It’s vital that you regularly update your inventory and asset tracking information so that you know precisely what you have so that you don’t pay more than you owe in taxes and insurance.
Protect your fixed assets and your business by keeping a detailed and up to date record on everything you own. It could save you thousands of dollars in insurance premiums, insurance claims, and taxes.