Going Beyond: Fixed Asset Management

fixed asset management pond

Here at Beyond Balanced Books, we aim to go further, or beyond, traditional bookkeeping. We actively look for ways to help our clients create the best outcome for their business. One way we do this is by providing fixed asset management services. What do fixed asset management services entail? And why should you be interested in this service? 

This article will provide best practices for managing your fixed assets and why a fixed asset management service is right for you. 

What are fixed assets?

Per previous articles on this subject, fixed assets are tangible assets purchased to serve a business purpose for a year or more. Common fixed assets include land, buildings, vehicles, and equipment. Unlike current assets, which are used up fairly quickly, fixed assets should be tracked throughout their useful life. 

Our fixed asset management service is designed to assist our clients with tracking their fixed assets. We take care of recording new and disposed fixed assets in the accounting records. Let’s focus on each of these events one at a time. 

Fixed asset additions

Many business owners do not consider the complexity involved in recording a fixed asset purchase. If you purchase a fixed asset with cash, usually the entry is straightforward. However, in many cases fixed asset purchases are more complex. 

When preparing to add a fixed asset to your books, you should consider the following factors:

  • Was this asset purchased directly with cash or was it financed?
  • If using financing, what are the interest rate and payment terms? 
  • Were warranty or maintenance services included in your fixed asset purchase? 
  • Were there any deposits or trade-ins involved in the purchase of this asset?

We always recommend our clients apprise us ahead of time when they are planning to make a major fixed asset purchase. Depending on the type of fixed asset purchased, we can provide them with the list of documentation needed to record the asset in the books. Not only do we record the fixed asset value but also we will set up any financing accounts needed in your books. We also retain a copy of the purchase to have supporting documentation. 

Managing disposals and depreciation

Similar to fixed asset additions, disposals can be just as complex. Depending on how the asset is disposed of, the accounting entries needed in your books may vary. Consider some examples:

  • You dispose of a used vehicle, but it is only partially depreciated on your taxes. How do you remove both the fixed asset and adjust for the partial depreciation? 
  • You sell a piece of equipment to a third party. How do you remove the fixed asset from your books and record the gain/loss on the sale proceeds?
  • You dispose of another vehicle as part of a trade-in for a newer one. The old vehicle was still being financed. How do you clear out the old fixed asset and pay off the previous loan? 

In each of the scenarios above, care is needed to record these properly. Trying to untangle these types of transactions way after the fact can be challenging.

On a related note, all fixed assets (except for land) do depreciate. That depreciation needs to be recorded regularly in the books to track the asset’s useful life. Our team can work with your tax professional to both estimate and record the depreciation expenses incurred throughout the year. 

Business property tax compliance

Another challenge small businesses face as they grow is paying personal property tax on business assets. Many local governments require small businesses to file these types of tax returns when their fixed assets hit a certain threshold. For instance, in our home state of California,  personal property tax filings (Form 571-L)  are required when the total cost of fixed assets (excluding licensed vehicles, inventory, intangible assets, and application software) exceeds $100,000. 

Preparing and filing property tax returns requires detailed reporting. Failure to file timely can result in significant penalties and interest. We help business owners navigate the challenges using a few proactive measures:

  • We regularly review our clients’ fixed asset records to see if they have met or exceeded the fixed asset threshold for their region.
  • We verify with the client any fixed assets disposed of over the previous year and record the appropriate entries needed. 
  • We thoroughly prepare their personal property tax returns and submit them promptly. 

If you are new to filing personal property taxes for your business, we highly recommend not trying to handle this task yourself. Consult with a bookkeeper or tax professional for assistance. 

We love going Beyond for our customers with these types of services. By handling the complexities of recording fixed assets, small business owners can get back to what matters: using their assets to generate revenue and help their business grow. Interested in learning more about our other services? Visit our services page to learn more!