Fixed assets

A Basic Guide on Fixed Assets – What Businesses Need to Know

Your business’s asset management is an important aspect of running your operations. It ensures you get significant returns on your investment to address particular needs. For example, you may need to spend money on a printer to make your receipts and promotional materials, meaning you must ensure any costs that go into keeping your printer working should generate profits. Among the different types of business assets, one of which worth mentioning is fixed assets. Use this guide to oversee your resources effectively. 


What is a Fixed Asset?

An asset is something that you own in your business for at least three years. They can either be tangible or intangible, depending on the asset’s intended use. For instance, your factory’s heavy machinery and service vehicles are tangible because they are tactile. On the other hand, intangible assets are the opposite, like copyright claims and software development. 


When recording them for your business accounting, you would typically do it differently than expenses since they are more complex than other resources, especially intangible assets. As such, you would often have to record a fixed asset as overhead cost if it is below 250 pounds because they are considered immaterial and possibly immeasurable. 


Therefore, computations for fixed assets are often harder to determine because you need professional accounting experience to tabulate them accordingly and gain informed insights into your operations. Once you have an accounting expert helping your business, you can better track your assets, consider what you can adjust for costs, mitigate potential risks, and optimize for growth. 


What Are Things I Should Consider When Managing My Fixed Asset? 

Besides the computing aspect of fixed assets in reference to your business, you should understand overall costs within a set period to determine if you are gaining or losing money. Typically, you should consider depreciation and amortisation, which are the two ways you can spread the costs of your fixed assets. Take note that depreciation corresponds to costs for tangible fixed assets, while amortisation is for intangible assets. 


For depreciation, your main goal is to look into the longest intended lifetime of a tangible asset. In other words, you want to determine how much the asset will be of use to your business. For example, if you purchase a computer with a 4-year usability period, you will spread the cost across four years. 


Additionally, take note that some tangible assets fall under straight-line depreciation, meaning you are basing it on the price for purchase. Ideally, its usability rate should be consistent as the time you first bought it, or you end up losing money. Other tangible assets are under the reducing balance depreciation, which is based on a fixed percentage of the current value at the end of the year. It means the amount affecting profitability and losses gradually decreases yearly. 


When calculating the amortisation for intangible fixed assets, you would typically use the straight-line depreciation method to spread the cost evenly throughout its lifespan. 


How Can I Best Protect My Fixed Assets? 

Most businesses often encounter plenty of perceived risk with asset management, especially with fixed ones, because of the economic instability nowadays. This phenomenon can be best illustrated by the global pandemic, forcing many suppliers to raise their prices and close their operations. In effect, most business assets became useless. Thus, it would be best in this day and age to have an accounting professional help you to navigate through these trying times. 



Fixed asset management and other related business accountancy functions are necessary to your business’s overall success and resiliency, especially during these difficult times. Fortunately, you now have a better understanding of what you must do. Meanwhile, if you feel you lack the workforce and professional skills to calculate your costs and expenses, feel free to reach out to our team and other experienced professionals. 


Are you looking for affordable accounting solutions to manage your assets effectively? We at Cheap Accountants in London can provide you with that. Our team offers a range of custom bookkeeping, taxation, and other similar services for various businesses like yours. Get your financial records and management systems assessed by our professional small business accountants to ensure efficiency and transparency. 


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