You’ve purchased a tow truck or logging equipment with Coastal Kapital. How much is it worth now? Do you have a good idea of what fixed assets your business owns and their current value? And since fixed assets depreciate over time, it can be difficult to remember to replace or repair them.
Keeping track of these things might seem like a lot of work. That’s where fixed asset reporting comes in. Running regular fixed asset accounting reports helps business owners stay aware of what fixed assets they own and their value, and to keep track of any routine maintenance.
In this article, we will discover five accounting reports that can help every business owner be in the know.
What are Fixed Assets?
Fixed assets are tangible assets (physical property that can be touched) that are purchased for long-term use in business operations. Long-term use would be considered anything used by the business to generate income for at least one fiscal year.
These assets may also be consumed or converted into cash. Common fixed assets used by businesses include:
- Office supplies
- Office furniture and equipment (printers, chairs, etc.)
- Computer hardware and other technologies
- Vehicles (company cars, tow trucks, semi-trucks, forklifts, etc.)
Since fixed assets are made of physical material, this means they can deteriorate and experience wear and tear. To account for asset depreciation, companies must apply the allocation of asset costs to the balance sheet over the asset’s useful life.
The useful life of an asset refers to an estimate of the number of years an asset is considered usable to a business before its value is fully depreciated. Once the asset comes to the end of its useful life, it can be salvaged or disposed of.
Fixed assets, also known as capital assets, are commonly represented as property, plant, and equipment (PP&E) on the balance sheet.
Fixed Asset Management
Small businesses want to get as much use as they can out of their fixed assets. To achieve this goal, you will want to set up a fixed assets management system to monitor and manage your assets. While business goals may vary, there are common objectives most businesses share.
Let’s take a closer look at the objectives of an asset management system:
- Prevent waste: To help minimize losses, businesses need to be aware of the condition of their assets. Knowing the value of the asset in its current state will help prevent waste. For example, knowing a case of milk will expire in a week will allow you time to sell it before expiration.
- Improve utility: When you are aware of the state or condition of your assets, it will allow you to make decisions on where and when the assets can be used and allocated. This can extend the lifespan of the asset, and can also help improve your business processes. For example, knowing when your company vehicle is due for an oil change and regularly going for preventative maintenance will help extend the useful life of the asset.
- Maximize return on investment (ROI): When you prevent waste and improve an asset’s utility, you will automatically see more return on your investment for these assets. You will save money on repurchasing assets through prevented waste. And you will save on repairs when you improve the utility of what you currently have.
Along with these common objectives, your business may also have other political, social, technological, or environmental objectives. Managing your fixed assets efficiently and effectively can help achieve some of these objectives.
Asset Management Software
Asset management objectives can be achieved through the use of tools, techniques, and software. With a personalized system set up for your business, you can track the overall performance and condition of your fixed assets.
This ensures your business is capitalizing on their full value throughout their useful lives.Businesses that don’t use asset management tools often manually report on spreadsheets as a replacement. Unfortunately, these kinds of systems will lead to many more errors than a dedicated asset management system.
Small businesses often use a computerized maintenance management system (CMMS) like Limble to manage their fixed assets. This type of software enables the business to easily schedule, manage, and report asset maintenance.
With CMMS, it can optimize maintenance workflows, keep track of resources and routing, manage operations and repairs, as well as provide custom reports and audits.Larger businesses will likely go for an enterprise resource planning (ERP) system like Sage Intacct to help manage their fixed assets.
Unlike CMMS, ERPs deal with more than maintenance. ERPs are capable of managing the complexities that come with larger businesses. They provide centralized databases that allow the automation and optimization of routine business processes.
This is the set-it-and-forget-it kind of software that will allow you to automatically generate accounting reports.
Fixed Asset Reports
To best achieve the asset management objectives listed earlier, it is helpful to create fixed asset reports. Creating and analyzing these reports gives you or your asset manager key information that will help your business carry out important decisions regarding asset management.
Asset reports should have a detailed overview of each individual asset so you can monitor, track, and manage them efficiently. Asset management software systems allow you to plan and optimize the asset’s lifespan, ending with the asset’s disposal.
As you collect data from the asset’s life cycle, the software can help you put together essential reports for your business. If you don’t run regular reports, your business may:
- Lose track of expenses and costs, leading to overspending or miscalculations
- Not be prepared for accounting audits
- Unreliable inventory management, resulting in wastage or lack of inventory for business
- Suffer from inefficient workflow
- Suffer from less productivity
With the software you choose for your business, you will be able to gather asset data, create fixed asset registers, track assets, and create standard reports for careful analysis of your business. There will be several reports you’ll want to run regularly to ensure you prevent waste, improve asset utility, and maximize ROI for your business.
Let’s explore them to give you an idea of what information is most important for asset management objectives.
5 Accounting Reports to Run Regularly
This is by no means an exhaustive list. Speak with your accountant about which reports would most effectively benefit your business. However, running the following five reports on a regular basis will give you the data you need to manage and optimize the fixed assets you own.
1. Fixed Asset Listing Reports
To get an overall view of all the fixed assets you have on hand, run a fixed asset listing report. Choose to display one report for one group of assets or select a multi-report function to view all asset classes. This type of report allows you to see what individual assets you have, where it is located, and total value of your assets.
These reports should have data including things like:
- Acquisition date
- Purchase price
- Current net book value
- Asset details and description
- Asset number
- Serial number
- Whether or not the asset is currently in service
- Authorized users
With an asset management tool, you can easily export all the asset data for review of the current year or the entire history. Upon analysis, you may find incomplete asset profiles that need to be filled in or updated. Some assets may not even be physically accounted for due to being lost, stolen, destroyed, or misplaced.
These “ghost assets” will need to be removed from the asset register in order to preserve up-to-date fixed asset transactions. This is why it is imperative that you run these reports on asset records regularly. You will also get an idea of whether or not your asset purchases are within your budget.
2. Inventory Reports
Similarly, you will need to run inventory reports. With these reports, you will be able to easily scan the stock, goods, and equipment you have available. Businesses focused on IT, retail, or manufacturing can benefit the most from these types of reports.
Keeping regular tabs on your inventory can give you an idea of what items are sold or used most in the business. You can then easily order more inventory if necessary. Procurement reports are also closely related to inventory reports.
On these, you will find any pending orders for new inventory, keeping you from double ordering. Your inventory management tools should allow you to view your asset’s current location. This will allow you to quickly assess what inventory is available where.
3. Maintenance Reports
To keep your business running efficiently, you will want to make sure all of your fixed assets are well-maintained. Keeping a schedule of when preventative maintenance should occur helps keep your physical assets in good condition.
As a result, they will last longer and will likely not need unexpected repairs (which can disrupt your business operations through added downtime). You also will not misjudge when maintenance is needed since the information is recorded for you to rely on.
This saves unnecessary spending in the long run! Carrying out your maintenance upkeep program will be as simple as running regular maintenance reports. Maintenance reports should include things like:
- Inspection dates
- Maintenance schedules
- The asset’s useful life
Knowing this information ahead of time will allow you or your asset manager to plan and budget your maintenance costs in the far or near future. It will also allow you time to schedule the maintenance.
4. Financial Reports
Keeping accurate and organized information in your general ledgers is imperative for financial audits. Running financial reports regularly can help you keep an eye on your fixed asset accounting ledgers to ensure you are always prepared and compliant with accounting standards.
Financial reports should include:
- Asset purchase price
- Current valuation
- Detailed from depreciation account
- Depreciation expense
- Accumulated depreciation amounts
- Useful life valuation
- Running costs
- Disposal costs
Asset depreciation can be represented through a variety of depreciation methods, and it is important to choose the right one for your business. Depreciation expenses should also be tallied on your tax returns to save on income taxes to the IRS.
Keeping track of your depreciation calculations allows you to always be aware of how much value your assets have. Then you can make informed decisions for your business. Not only are accurate financial statements essential for audits, but they can also help you assess whether or not the asset is performing optimally.
Displayed are the costs associated with the asset, as well as its original and current value. Is it giving you the ROI you originally hoped for? If not, you may need to dispose of the asset or make a change within your business operations.
5. Asset Disposal Reports
Once the fixed asset has reached the end of its useful life, it is time to dispose of it. Business owners will know when to dispose of the asset when it has racked up high maintenance costs or is no longer profiting the business.
Having a report on hand to assist with this decision will ensure it is not disposed of too early or too late. View previous disposal records to assess the right time to dispose of your current asset. A search for previous disposal reports will show you when an asset was salvaged or disposed of.
These reports are also helpful for determining if the asset’s value was gained or lost as it depreciated. On disposal reports, you will find information such as:
- Date of end of useful life
- Expiration dates of assets’ leases
- Disposal costs
- Whether or not the asset was disposed of
- Salvage prices
Get An Accurate Birds-Eye-View To Navigate Your Business
Fixed asset reporting will keep you informed on what assets you own and their value, what inventory you have and where it is located, what maintenance your assets need and when, how much depreciation your assets have accrued, and when the asset will need to be disposed of.
These reports give you a birds-eye-view of your business. And once you have accurate, reliable data in front of you, you can navigate in the right direction. If you decide the next step is obtaining small business lending, Coastal Kapital is here to help!