An overview of fixed asset management
Fixed asset management is an important role within any business, even a small business however it is something that many small business owners fail to appreciate. Whilst many small businesses are not fixed asset intensive, i.e. they don’t have a high number of fixed assets all of these will have some fixed assets.
For small owner managed businesses, where the proprietor is the sole person in the business it may be argued that fixed asset management is a waste of time. After all, the proprietor will know what
business assets there are, where the business assets are and what state of repair the business assets are in. A sole proprietor is not going to pinch his own asset so theft is not a problem. The sole proprietor will have total control over the business and its assets therefore a complex fixed asset
management system is not going to be of any benefit.
Fixed asset management becomes more important when the business occupies its own premises complete with its own fixtures and fittings, computer equipment, vehicle fleet etc. and employs a number of staff.
When the number of assets increases the need for fixed asset management increases. When the types of asset becomes more complex the need for fixed asset management increases and when the business employs people the need for fixed asset management increases.
In a nutshell, fixed asset management is managing and controlling the fixed assets. Fixed asset management encompasses many activities including maintaining assets and ensuring they are in a good state of repair, replacing assets they are wear out and become obsolete, ensuring the assets are adequately insured and protected and ensuring the assets are kept on the company’s premises when not in use. When businesses have a lot of assets the role of fixed asset management can easily be a full time job for someone.
What does fixed asset management consist of?
The most important part of fixed asset management is the fixed asset register, which as its name suggests is a register, or a list, of all the assets the business owns. The fixed asset register should include details like the date the asset was purchased, details of the asset (including a unique reference number), who the asset was purchased from, the cost of the asset and the expected life of the asset. This information is the bare minimum that should be held for each and every asset,
and t is advisable to hold more information wherever possible. For example, the date the asset was last serviced is useful, when dealing with cars the date of its last MOT and when the road fund license is due is useful, the date of the next service is due etc. etc. is also useful information that will ensure the assets are kept in tip top condition.
The fixed asset register is also useful for accounting purposes. In the financial statements the fixed assets note must include the cost of the cost of the assets, any additions in the accounting period, any disposals in the accounting period, the accumulated depreciation of each asset, the depreciation charge for the accounting period and any depreciation written back on disposals. All of this information should be taken straight off the fixed asset register.
Since the fixed asset register is the underpinning concept in fixed asset management it is important to ensure the fixed asset register is kept fully up to date. The fixed asset register needs to be updated the very day an asset is bought or sold to ensure the transaction doesn’t get missed and the asset doesn’t get recorded.
It is a sad fact of life but theft does occur and employees cost small businesses thousands of pounds each and every year by stealing assets and taking them home for personal use. A key aspect of fixed asset management is protecting the fixed assets and the asset register can help with this. By carrying out random checks and fixed asset audits the fixed asset management team can ensure the assets owned by the business can be fully accounted for. In any case the fixed asset management team should clearly label each and every asset so it is easily identifiable as belonging to the business and make it less attractive for an employee to try and steal it.
There are all singing all dancing fixed asset management software packages available. Some of the fixed asset management software packages are excellent and some are not worth the money,
however it is not always necessary spending a lot of money on fixed asset management software as Excel is more than adequate to maintain a fixed asset register for many small businesses.
There are some instances when Excel is not good enough and a dedicated fixed asset management software package will have to be bought. For example, if the business has a large fleet of company cars it is not going to be possible to get all the information on Excel very easily. The business will need the details of each car, the registration, the insurance renewal date, the road fund license renewal date, the service schedule of each car, details about the driver of each car etc. etc. This is a lot of information and in these circumstances dedicated fixed asset management software is best. The software will have a pre warning mechanism built in that will automatically tell you when a service is due or when the MOT is due or when the insurance policy is up for renewal to make sure each and every car is legally on the road. The penalties for having cars illegally on the road, whether
intentional or not, are punitive and can end up costing the business a lot of money.
The final word on fixed asset management
As you can see fixed assets are very important to a business therefore they need to be controlled and managed and this is where fixed asset management comes in. Many businesses would struggle to trade if the fixed assets were not up to the job therefore fixed asset management is very important, and more important than many business owners seem to appreciate.