Fixed assets are a common name for long-term, or non-current, assets that are physical items. These are generally grouped under property, plant and equipment (PP&E) assets. They are composed of things a business needs to operate and can be as small as a pencil or as large as a building. To properly account for fixed assets, a business must have a detailed list of its PP&E. A fixed asset inventory provides this information.
Fixed assets are depreciated, which provides a tax deduction for a business. If a business does not have a correct record of its fixed assets, it could be taking too large or too small of a deduction. For an accurate depreciation calculation, a business needs to know when a fixed asset was purchased, what its initial cost was, and what its expected useful lifespan is. All of this information should be included in a fixed asset inventory.
A fixed asset inventory is also necessary for proper insurance coverage. Fixed assets often have a significant value and need to be insured. A business does not want to insure items it does not possess, nor does it want to fail to insure items it does possess. A fixed asset inventory can also reduce theft, which in turn will reduce insurance premiums.
Asset inventory management software can be used to assist with the inventory process. Items are labeled with barcodes or radio frequency identification (RFID) tags and loaded into the software via a scanner. When new fixed assets are purchased, they are added to the list. Similarly, when existing fixed assets are disposed of, they are removed from the software. In this way, the software can provide precise fixed asset inventory tracking.
Typically, asset management software will interface with a company’s accounting system and handle tasks such as noting depreciation and keeping the asset ledger accounts up to date. The software also will often provide a way to record additional asset data, such as the type of fixed asset, when it was acquired, the supplier, and the model and serial numbers. The software can make this data available to a company’s other systems so information is recorded in one place, reducing data entry time and errors.
Without asset management software, a company would have to manually produce a fixed asset inventory. For a company with few fixed assets, a manual process is most likely the best option. A company that has many fixed assets would be best served by investing in asset management software. Regardless of the process used, a company that deals in fixed assets will need some way to produce a fixed asset inventory.
