The Importance of Performing an Inventory of Fixed Assets

 

April 21, 2021

What are fixed assets?

When accountants use the term “fixed asset,” they are referring to a physical asset that is acquired by a company and is expected to last more than one year. Some common examples include machinery, computers, vehicles, or furniture.

You might not think to conduct an inventory of your fixed assets every year, but it’s the best way to develop a solid understanding of what your company owns and how the items are reflected on your balance sheet. This activity can be time-consuming but could potentially save a substantial amount of money.

For example, an updated fixed asset listing could be used to lower your property tax bill by reducing the number of assets subject to property tax. Once you know what you own, you’ll also have a better idea of where you could economize — such as by leasing instead of buying.

Here’s how you can perform your own inventory.

Conduct your master inventory. You’ll need a master list of your physical assets to get started. Assign each item a unique number and add it to your software; at the same time, permanently label the physical item with its corresponding number. Though initially this may require a significant time commitment, putting a system in place will make inventory easier over time.

Complete regular check-ins. Once your master list is in place, regularly inventory your physical assets and compare them against your master list. Dispose of assets that are obsolete, missing, or past the point of repair.

Manage any losses immediately. Fixed asset tracking can increase accountability by helping you effectively identify losses and manage your assets. Without a system in place, you may not even notice if your assets are lost or stolen. Proper asset management is also essential to know where assets have been allocated; otherwise, they could potentially get lost in the system itself. Increasing the overall accountability of your system also discourages the misuse of assets by employees and ensures you will notice the loss — and recover from it — as soon as possible.

Managing inventory is an important part of the accounting process. We’re here to help you through it. We can assist in establishing a process of accounting for your fixed assets, so your balance sheet more accurately reflects what your company owns.

You can count on us to help you come up with a plan and simple procedures to make this process run smoothly. Contact Adriane Reams, CPA (areams@gccpas.net) with any questions about this article or to see how we can help you with your fixed asset inventory.

 

 

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