Assets represent value in your business and have ramifications. Proper management is needed.
The business assets of your company are, very simply, the property you have that helps you generate income. For an architecture company, this may include design software; for a restaurant, specialty pizza ovens; for a tattoo artist, pigmented inks.
Operating assets are the things needed in the daily operation of a business, like cash, machinery, buildings, equipment,copyrights or patents. Non-operating assets, meanwhile, can generate income, but aren’t required for a business to run. Vacant property, or interest earned on income, would be in the category of non-operating assets.
Why do assets matter?
Properly managing the assets of a business allows you to get maximum advantages when it’s time to file taxes or sell your company.
Here are the things you should know about each asset in your firm: What purpose it serves; its current condition; how effectively its being used; if it will be as useful in the future as it is today; what is being done in terms of maintenance; if its depreciating quicker than expected and what this means in terms of impact; and when you plan to stop using it.
Taking inventory of your assets is no small task, but a professional accountant can help. The basic steps are:
Identify your assets. Experts say this is the most tedious part of the project, but the most important. Computers,equipment, merchandise, property and signs are just the beginning of what should be an extensive, detailed inventory of assets and their locations.
Attach a value to each item. Your accountant will help you determine market value with depreciation factored in.
Record these business assets. See what software your accountant recommends. Something that’s easy to use is ideal,so that you’ll be sure to add updates depending on cash, inventory and depreciation changes.
Insure replacements for these items. Needed to help your business operate, you’ll likely need auto insurance for vehicles and policies to cover things like theft and fire, as well.
Have your accountant explain how assets impact taxes. Investing in an asset — say a new piece of technology — decreases your company’s taxable income. In other words, you don’t have to claim the full cost of a large tech investment all in one tax year. You can spread that cost out over several years as its value depreciates, extending the tax-break benefit.
It helps to streamline the asset inventory and management process if a company designates certain people to oversee assets within certain departments. It’s good practice to set up a system where a new asset is not used until it’s entered into the asset-management software, so it’s tracked from Day One.
The company should also work to reduce ghost assets. These are considered active assets within your company, but are no longer usable, lost, or have been stolen. However, due to less-than-accurate tracking, your company may still be paying taxes on these assets and insuring them as well.
Assets represent real value in your business.
Further questions on managing company assets? Kerby Accounting is happy to help.