Managing and maintaining a fixed asset register is critical for any business. It helps an organization in knowing how many assets they have. Most of the time, small businesses believe they don't have the requirement of maintaining a fixed asset register because they can calculate assets on their fingertips.
But they forget that when an organization grows, assets are added regularly and now, they cannot calculate their assets on the fingertip. So, in this blog, we will explore what are the benefits of having a fixed asset register!
But first, let's cover some basics!
What Is a Fixed Asset?
Fixed assets are those assets that help the organization in generating income. It includes assets such as vehicles, machines, equipment, etc. Fixed assets are purchased for the long term. They are not easily converted into cash. Some people also call it as capital assets.
What Is a Fixed Asset Register?
A Fixed asset register is the complete asset list owned by an organization. It holds all the asset-related information such as:
- What an asset is
- Where the asset is located
- Date of asset purchasing
- Asset purchase cost
- Maintenance information
- Expected asset life
- Expected asset value at the end of its useful life (Salvage value)
The main objective is to hold accurate information about each asset. So that asset can be utilized when it is required. Moreover, this register also assists in tracking the asset value and depreciation value also. An organization may use an excel sheet or proper asset management software for these purposes.
What Are the Benefits of Maintaining a Fixed Asset Register?
There are many benefits of maintaining a fixed asset register:
1. Complete Information
When you maintain a fixed asset register you can have all the details about assets that are very helpful in decision making. Which assets need to dispose of what is the asset status, how frequently it is used, where it is located for audit trial purposes.
When you know asset whereabouts, it is helpful for the audit team to verify assets physically. Complete information about assets provides you with crucial information on the asset's average life, asset expenses, utilization of the asset. These sorts of information help in setting future goals.
If your reports are not accurate then your organization might end up paying a penalty for a rule violation. No organization wants these sorts of issues, right?
To maintain accuracy, an IT asset register can help by providing precise information. With the IT asset register, you can avoid all the compliance-related issues as well.
Here is an example, suppose your organization using software & it expired recently. The auditor discovers it and penalizes the organization. But with this software, will alert you in advance that software is about to expire and you can renew it.
Depreciation of assets is essential for an organization. Most of the organizations have some errors in calculating depreciation. Because several factors need to be considered which you will not be able to do manually.
However, at the point when your association is equipped with this software system, you won't need to stress over depreciation computation as this software comes with several inbuilt deprecation methods.
Maintenance is one of the invisible pillars that can play a significant role in business growth. To keep assets well maintained and to avoid sudden asset breaks down you must accentuate asset maintenance.
In the long run, you will see a great savings in your bottom line. A maintenance strategy is a never-ending procedure for calibration management, increasing efficiency, and asset productive life, safety, and reliability as well.
What Are the Types of Fixed Asset Registers?
Mainly there are two types of fixed asset register that we have discussed below:
- Fixed asset register - This is the simplest form and type of a fixed asset register. Most of the organization utilizes only this type. It contains the field that we have told above.
- IT fixed asset register - As the name suggests, this type of register is developed for IT organizations. Asset Register is highly effective for these organizations specifically. It contains field such as:
- Asset type - Hardware & Software
- Model Number
- System-related information for e.g. RAM (Read-only memory) etc.
- Purchase date
- Warranty expiry date
- Depreciation Rate
How to Ensure Precisely Maintained Fixed Asset Register?
You can create a list with a fixed asset register or asset management software and cross-check with physical assets. The asset verification and audit process will be more simplified when assets are tagged with barcodes or RFID.
With this process, you will be able to know how many assets you have on the list; how many are lost, and how many are present there. This complete procedure shall be done & repeated at a regular period to maintain accuracy.
How Can Asset Management Software Help Other Than Maintaining a Fixed Asset Register?
Asset management software can help in various ways:
- It can help in extending asset life.
- It can also help in enhancing productivity.
- With calibration management feature performance can be optimized.
- Streamlined maintenance.
- Avoiding asset theft & misplacement.
Moreover, it keeps the organization competitive as operations become automated. That is why organizations are utilizing this software.
According to Statista, “The global market for fixed asset management software is forecast to grow from 3 billion U.S. dollars in 2019 to 5.2 billion U.S. dollars in 2024.”
A fixed asset register is really helpful especially when an organization is equipped with a lot of assets. However, various types of registers are available, so it is important that you figure out first which type of fixed asset register will be highly effective in your organization.
The software that meets all your requirements shall be chosen over thousands available in the market.
A fixed asset register shall be reviewed at a regular interval to make sure that it can present your company's financial asset position in the right manner.
Frequently Asked Questions (FAQs)
1. Why the spreadsheet is not an effective way of maintaining assets?
The spreadsheet can be effective if is utilized on a small level. It means when an organization is small and very limited people access it.
However, when the company is big, multiple branches are there, a lot of people are accessing files then it is not an effective way of maintaining assets. Lots of people will update the file back and forth so error chances are increased.
2. What assets can be included in a fixed asset list?
There are several types of fixed assets such as IT assets laptops, smartphones, computers, etc. The construction tool will also be included in the fixed asset list. However, assets may vary from company to company for example a delivery truck will be considered as an asset in the post office. However, a truck will be considered as inventory for a truck manufacturing company.
3. How fixed asset register impact business?
A fixed asset register is very helpful to businesses as it creates a complete asset list. It can play a crucial role in avoiding asset theft or misplacement. It also helps in the asset auditing process. Overall, it provides great assistance to all kinds of businesses.