Small businesses need to spend time managing their fixed and variable assets. This includes creating a record of fixed and variable business assets and tracking depreciation. Asset records are used for accounting and tax purposes, and provide valuable information needed to secure business financing.
Whether you are starting a new business, or managing an existing venture, setting up asset management processes will be time well spent. So where do you start? Below are specific steps you can take to identify and track your business assets and set up management systems that work for your organization.
Step 1: Make Preliminary List of Your Assets
Make a list of everything you consider to be an asset for your small business. This might include buildings, vehicles, machinery and other fixed / tangible assets, as well as variable / intangible assets, such as intellectual property and digital assets.
If you are not sure if something is an asset, include it – you can always take it out later.
Step 2: Assign Value to Each Asset
Review your purchase records for fixed assets, and service costs / values pertaining to your variable assets. Take into account depreciation, repairs and maintenance, and any existing appraisals. Do some research about how depreciation is calculated at the state and federal level.
Digital assets and other intangible assets will be managed and calculated very differently than fixed assets, such as trucks. Remember that careful estimating is ok during this step – the next step is getting an expert review of your list.
Step 3: Hire an Accountant to Review Your Asset List
Use your business accountant (or hire one, if you do not already have one) to review your list of assets. If it is a draft list you have spent some time on, the review will take less time and will cost you less money. The accountant will likely ask you pointed questions that may lead to adding more assets or changing value of certain assets.
While this is an expense, it will ultimately provide you with peace of mind that you are listing your assets correctly. Remember that an accountant can give you tips for leveraging assets on your tax returns.
Step 4: Define Processes for Asset Management
Once you have your completed asset records, give some thought to what actions need to be taken to keep it current and accurate.
Delegate the responsibility of managing assets to a specific person or people in your organization and provide to them specific guidelines about how often they need to review and revise the asset list, and what depreciation method to utilize. Processes should always be written and made available to the relevant staff, as well as revisited to adjust as needed.
Step 5: Decide Where Assets Will Be Tracked
There are multiple options to tracking assets, from using a simple spreadsheet, to utilizing software to track and manage assets. If your business does not have a long list of assets, or the assets are mainly fixed and easily calculated for depreciation, you might not need to use a software.
If you do have a substantial list of assets, and it includes intangible assets, or if you simply want to be extra thorough and organized, you might opt to use as asset management software.
Step 6: Selecting Asset Management Software
If you decide to utilize an asset management software, this step requires you to do some research. Many asset management software options specialize in a specific industry, such as IT, and that might make them a good fit.
Assess the functionality of system options, the workflows that you and your staff would need to perform, the implementation timeline, and the cost. View some demos of the systems that check out during your initial review. Consider each solution’s level of customer support.
Step 7: Train Staff in Asset Management
Gather the staff members that will have any relationship to managing assets, and train them in your asset management processes and tracking mechanisms. Listen to their questions and feedback and adjust processes as needed. Make a plan to retrain periodically, so that new employees have this skill set, and more established staff have access to refresher training.
Asset management is a key function within most businesses, and one that can affect your bottom line. Take the time to develop and set up asset tracking and management practices within your organization – it will prove to be time well spent.