Tracking assets is a vital part of any business practice, no matter what size your business is or in what industry. Fixed assets are anything a company can use internally for more than a year. Some examples of fixed assets are vehicles, computers, office space (if owned by the company), machinery, plants, warehouses, office supplies, and tools just to name a few. Keep reading to learn more about tracking your fixed assets
Tracking your assets aids in financial accounting, in preventing theft or loss, and in keeping up with maintenance. Assets are anything tangible that belongs to the company in addition to those listed above. Companies track their assets so that they can know where they are, who is using them, what condition they’re in, how much they have, when they’re due back if off location, and the maintenance requirements and depreciation status.
Depreciation refers to how much value a particular asset has lost in the last year and the practice of allowing a company to pay off the purchase cost of a fixed asset over many years. Senior leaders at a company are usually who decides the life expectancy of new assets; that refers to how long the company predicts the asset will remain viable. It’s essential to correctly record these numbers since the value of all fixed assets a company owns is usually what makes up the greater majority of a company’s total value and the balance sheet.
To give you an example, we’ll use a gas company. The company buys a new machine to drill off shore for $1.5 million. The company would sign an agreement with a bank to secure the funds through a loan and an accounting manager then subtracts this amount from the company’s asset account and adds it to their equipment account. An asset manager would then predict that the company uses this drill for five years. The accounting manager will divide the drill’s market value by five years, which equals $300,000 a year. He then subtracts that sum from the depreciation account for the next five years and ends up with the company’s total asset value.
Many companies use a barcode system to track their assets. Each asset is assigned its own serial number that can be quickly recorded using mobile scanners. The company owner can easily record and formulate a fixed asset report using this system.
These days with computers, you can do your asset tracking using one of the many software programs available. It used to be that inventory and recording all assets had to be done by people every time but that’s changing with the growing capability of computer software. Tracking can also be done using mobile device software and making it much easier for the asset owner to take inventory, even if his assets are located throughout the country.
Tracking assets is a complex and intricate part of owning a business. It is possible to do yourself, but if it’s in your budget, it’s worth the cost to have accountants and asset managers do it for you so you can ensure your numbers and reports are as accurate as possible.