What is Fixed Assets Management?

Companies invest substantial capital in fixed assets like office equipment, heavy machinery, vehicles, and real estate. These assets are crucial for generating revenue and meeting customer needs, making their careful management vital for success. Here’s what you need to know about managing fixed assets to maximize efficiency, reduce the risk of accounting errors, and track assets throughout their lifecycle.

Fixed assets management is the process of maintaining and tracking a business’s fixed assets and asset data. Typically, companies use asset tracking software and a fixed asset register to help manage their assets. Fixed assets management is important for any business that has physical or other long-term assets. Before we dive into the importance of fixed asset management, and how companies can effectively manage valuable assets, let’s take a step back and define what a fixed asset is.

What are Fixed Assets?

Businesses typically have two main types of assets: current assets and non-current, or “fixed,” assets. Fixed assets are acquired by a company to generate revenue and have an expected useful life of at least a year. This contrasts with current assets, such as accounts receivable and inventory, which are expected to be converted into cash within a year. Cash is also considered a current asset.

Non-current or fixed assets are assets that are purchased for long-term use. They include both tangible assets and non-tangible assets. Examples of tangible fixed assets include real estate, heavy machinery, computers, and vehicles. Intangible assets encompass copyrights, trademarks, patents, and other forms of intellectual property. Tangible fixed assets are often listed as “Property, Plant, and Equipment” (PPE) on a company’s balance sheet.

More examples of tangible fixed assets include:

• • Computer Software

• • Furniture and Other Fixtures

• • Leasehold Improvements

• • Office Equipment

What is Fixed Assets Management?

Fixed asset management involves recording and tracking long-term assets throughout their entire lifecycle, from acquisition to disposal. It typically involves software and digital asset tags used to track and monitor asset data. 

The value of fixed assets often changes over time, with many physical assets depreciating or becoming less valuable. This happens as equipment gets older and more worn-down due to use. As an example, the more mileage employees place on a company car, the less valuable that car will be in terms of its resale value. Equipment such as software can also become less valuable as new, updated versions are released to market. Companies must maintain accurate records of the value of fixed assets to comply with accounting standards and reporting requirements.

Fixed assets management involves tasks, including:

Tracking the total value of fixed assets, including depreciation, is important.

• • Recording the total acquisition cost of each asset, which includes the purchase cost, shipping and installation costs, and other related fees, as well as its estimate useful life, expected maintenance requirements and costs, and its service history.

• • Recording depreciation expenses using a consistent method and schedule, while also tracking the status of fixed assets, including any transfers between facilities, divisions, or subsidiaries.

• • Logging any increases in asset value, including upgrades or other improvements.

• • Recording any decreases in asset value due to issues like accidents, natural disasters, or asset theft.

• • Accounting for asset disposal or sale, including any associated gains or losses.

The combined value of all a company’s fixes assets is often the largest item on its balance sheet. That means the value of fixed assets is important to a company’s overall financial health. Tracking fixed asset value is essential for meeting regulatory and legal requirements and for requesting loans. Improper fixed asset calculations can result in the under- or over-payment of taxes, fines, and lawsuits.

Fixed Assets Management Explained

Fixed assets management includes both accounting and operational processes.

Fixed-asset accounting includes recording changes to the status and value of fixed assets throughout their life cycle from acquisition to disposal. This includes tracking acquisition and depreciation costs, maintenance costs, and costs or gains associated with asset transfer/disposal.

Depreciation tracking spreads the cost of fixed asset acquisition over multiple accounting periods. This smooths out the impact of a fixed asset purchase and prevents sudden spikes that could skew financial results. It also allows the company to reduce its tax liability by deducting the expense of asset acquisition over time.

Managing Asset Depreciation

Depreciation is a fixed cost. A fixed cost is a business cost that remains constant regardless of the quantity of goods or services produced.

Examples of fixed costs include:

• • Rent

• • Salaries

• • Insurance

• • Property Taxes

• • Interest Expenses

• • Depreciation

• • Certain Utilities (if the cost remains constant)

Since depreciation is a fixed cost, this means automatic depreciation calculations can automate part of the process of managing fixed asset depreciation. This improves the accuracy of fixed asset value calculations and eases the burden on accounting staff.

Why is Fixed Asset Management Important?

For many companies, fixed assets represent a significant investment and are crucial to generating revenue. This means that good fixed asset management, including maximizing the revenue they generate, is essential for business success. Proper management can also reduce maintenance costs and issues like prevent unplanned downtime, equipment failures, and theft. It can also reduce the risk of accidents and legal claims. For large enterprises, addressing these issues can potentially save millions of dollars. Enhancing the efficiency and reliability of machinery, vehicles, and other equipment through effective fixed asset management can lead to substantial benefits, including:

• • Increased profitability

• • Better customer satisfaction and higher customer retention

• • A reduced risk of compliance or safety issues

• • Lower maintenance and repair costs

• • A better reputation with investors

Benefits of Fixed Asset Management Software

Fixed asset management software enables companies to make better use of their fixed assets, eliminate repetitive manual accounting tasks, and reduce costly errors. Even smaller companies with fewer assets can see significant benefits from using fixed asset management systems to automate fixed assets tracking instead of using spreadsheets and manual processes.

The benefits of using fixed assets management software include:

• • Increased automation

• • Better regulatory and legal compliance

• • Better business insights

• • Eliminating ghost/unusable assets from balance sheets

Key Features of Fixed Asset Management Software

Companies use fixed asset management software to track assets throughout their entire life cycle. Ideally, the software should also automate financial processes, such as depreciation, either through built-in capabilities or by integrating with the company’s accounting system. It provides real time insights into the status, performance, and maintenance schedules of assets.

All fixed asset management software should include:

A log of all assets – Fixed asset management software maintains a comprehensive and accurate record of all the company’s fixed assets in a central register, complete with asset IDs, barcodes, and other tracking details.

Records of key asset life cycle events and transactions – Fixed asset management software monitors each asset throughout its service life, recording details such as the acquisition date, original purchase price, installation and transportation costs, date of first use, estimated useful life, and both expected and actual maintenance and repair costs.

Automatic depreciation calculations – Fixed asset management software should automatically calculate depreciation over the asset’s expected lifespan, allowing companies to select the most appropriate depreciation method and choose between a monthly or annual calculation schedule.

Records of asset disposal – Fixed asset management software records the disposal of each asset, including the disposal date. It tracks details such as whether the asset was sold, retired, or scrapped, along with any proceeds from the disposal.

Dashboards and reports – Fixed asset management software offers dashboards for tracking key metrics and customizable management reporting.

Manage Your Fixed Assets with Sage FAS

Sage Fixed Assets, or Sage FAS, provides simplified fixed-asset tracking with comprehensive depreciation calculations. It tracks and manages fixed assets through every step of the asset life cycle. Sage FAS also integrates with other Sage products, providing one comprehensive platform to manage your business. Sage ERP eliminates redundant data entry, improves accuracy, and reduces costs while guarding against regulatory noncompliance.

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CertiPro is a trusted business technology partner. We are experts in Sage ERP and can customize Sage to fit your business logic. Click here to contact us to schedule a demo for Sage Fixed Assets Management or learn how one of our other products could help your business. It’s an ideal fixed asset management solution for your business.