Regardless of the type of business you run, you probably own properties that help you provide products and services. Your business assets are a valuable part of your operations and must be carefully maintained. Use a fixed asset management system to organize information about your business property.

What are fixed assets?
Fixed assets are the items in your business that are not normally converted into cash. These items can be any of the things listed below, but not land. They are used to produce goods or services, can be rented to third parties and for use in your business.
• Buildings
• Equipment
• Furniture
• Vehicles
• Computers
• Land
• Intangible assets

This type of commercial property has a useful life of more than one year. Inventory does not fall into this category because it is converted to cash as quickly as possible.

What is fixed asset management?
Fixed asset management is a specialized field where an accountant should be hired to properly track it. Tracking includes recording the date of purchase, the amount paid, the vendor the item was purchased from, and most importantly, recording depreciation. Depreciation is the method used to record the expense annually. An accounting transaction is used to record an amount of accumulated depreciation and depreciation expense. Without getting into the technical details of accounting, suffice it to say that if transactions aren’t recorded correctly, there can be a major problem when it comes time to file your company’s tax returns.

There is specific software that can be used apart from your accounting program if you wish. However, unless that software automatically posts to your accounting module, you will have to make a manual entry which could lead to problems if not recorded correctly. Most of the accounting programs have modules to record all the transactions related to fixed assets, which simplifies the procedures.

The importance of fixed asset management
Managing these properties makes things easier when concerns and opportunities arise. There are several ways this technique can help your business succeed:
• As a small business owner, you know that unexpected events happen every day. When something breaks, it’s easier to address the problem if you already know what’s going on.
• Know the best times to acquire new assets. This system will show you the right time to take advantage of asset replacement or purchase opportunities.
• Keep up with your tax obligations – When you buy these items, you generally must depreciate them. The IRS allows substantial write-offs of fixed asset expenses, but keep in mind that you lose any future expenses over that amount that may affect your tax returns. Fixed asset management helps you accurately assess depreciation expense and view the depreciation status of an asset.
• Determine the value of your business. Fixed assets add value to the overall value of your company. At the same time, accurate recording of depreciation expense is also necessary to determine your profit or loss.

This overview is intended to show the importance of the system used to track and depreciate these critical trade items. You must have adequate knowledge of proper accounting procedures before undertaking this program. Otherwise, how will you know if what you’ve recorded is accurate?