08 May 2019 Ankit Chadha

What are some of the best practices for fixed asset management for small businesses?

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Every organisation purchases assets with a view to use them in the long run. These assets include plant and machinery, furniture and fixture, land and building, vehicles and other equipment. Irrespective of the size of a business enterprise, it has to plan proper management and maintenance of its fixed assets. The management process is a simpler and less complex activity in case of a small sized organisation. Few practices which prove to be effective tools for fixed assets management for a small business are:

Start process of fixed assets management right from date of commencement-

Initiating the process for managing fixed assets right from the time an organisation commences its operations is ideal. This would ensure assets are optimally procured, properly tracked, effectively placed, their condition is properly monitored and chances of having ghost assets are minimised. End to end management of fixed assets by mode of software or physical inspection would prevent loss or damage of assets, violation of tax obligations and unnecessary expenditure because of poor maintenance.

Proper tracking to ensure optimal utilisation and eliminate wastage:

This would mean tracking the where, how and what of all assets. Mobilising assets from one department to the other to ensure no wastage. For example- Accounts department has a spare monitor which they do not require. Sales department on the other hand have a new person joining in for whom there would be a requirement to procure a new computer. If assets in store are well monitored, then the cost would be optimised by utilising the existing monitor instead of procuring one. This would not only save funds for the enterprise but also eliminate any kind of wastage or duplicity of resources.

Proper tagging and assigning bar codes to assets:

Assets should be properly categorised and unique asset codes should be allotted to all the assets. Different codes can be used for the different asset types. For example- fixture items like chairs and software machinery items like computers may have different codes developed for better control and management. These codes may be system generated in case a fixed asset management tool is in place or may be manually described so that the asset code explains the category, location as well as the count of the particular asset.

Random internal checks and audits:

It would be an easy task for a small organisation for run physical checks and audits of assets in its premises from time to time. A time interval of monthly or quarterly check may be defined depending on the size and operations of the organisation. These audits would not only confirm presence of assets but also help in tracking obsolete, not-in-use and assets which need any special servicing or maintenance. These checks would also help in identifying any kind of frauds or thefts as any missing assets would be noted and action would be initiated without any delay.

Necessary workings for proper amortisation on fixed assets:

Fixed assets depreciate due to passage of time and normal wear and tear on account of regular usage. Proper fixed asset management system would ensure sufficient provisions are being created in the Organisation for ensuring replacements and for complying with accounting standards. Proper amortisations would in turn result in proper valuation of assets, hence leading to accurate disclosures in financials.

Scheduling maintenance activities:

Fixed assets require maintenance activities for their upkeep in proper productive condition. Ensuring fixed assets are in a well-maintained condition is an effective practice of fixed asset management. For example- Proper annual maintenance contracts to maintain Air conditioners and computers in a good shape.

The significance of fixed assets management for a small business enterprise is paramount. It is very important from perspective of financials, audit compliances, smooth running of operations as well as minimising wastage.

Are you a small business looking for guidance with fixed asset management? Let us be your knowledge partner to share some of the best practices.