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By Sam Hunter
There’s no doubt that accounting is a small business’ most time-consuming, labor-intensive, and costly business practice. Various financial functions make up the accounting backbone of any business. There’s the general ledger, accounts receivable, accounts payable, order entry, inventory control, cost accounting, payroll, and fixed assets accounting.
The typical small business accounting system consists of a centralized general ledger (GL), several add-on and third-party modules, and various manual spreadsheets. The function most often performed via manual processes, or even overlooked altogether, is fixed assets accounting; yet, fixed assets accounting is one of the easiest routines to automate, and in doing so, create a compliant, cost-effective practice.
The Case For Fixed Asset Management
Proper fixed asset management is worth the time and effort. The payoff can take place in a matter of months. Consider the number of fixed assets currently owned by your business: buildings, automobiles, trucks, desks, bookcases, chairs, computers, printers, and more. The list adds up quickly and fixed assets are likely your company’s most costly investment.
Isn’t it important to know their whereabouts? Shouldn’t you know if some of them are no longer in use, so you can stop paying taxes and insurance on them? Wouldn’t you like to maximize the depreciation you can take on your in-service assets, saving money come tax season?
Small businesses handling fixed asset management manually may not realize that the lack of automation and legislative checks might be dragging down their system. Not only might they be using outdated tax rules and depreciation calculations, they could also be out of compliance with the latest legislation. Just last month, Congress passed the Tax Relief and Health Care Act of 2006, which includes several provisions affecting fixed assets. The good news is that automating the fixed assets accounting process might be easier and more cost-effective than small business owners think.
International Extrusions, a full-service, state-of-the-art aluminum extrusion facility based in Garden City, Mich., needed to increase the accuracy of its fixed assets information. The 155-employee company switched from spreadsheets to automated fixed asset management software about six years ago.
“Our depreciation information was inaccurate when we kept it in spreadsheets,” says Dave Brokos, controller for International Extrusions. “Now I can just push a button and calculations for our nearly 700 fixed assets are done, and accurate. Plus, I can do everything related to fixed asset management myself instead of having an auditor do it. One hour of an auditor’s time would come close to paying for our software maintenance costs for the entire year.”
Solid fixed asset management solutions enable small businesses to barcode and inventory their fixed assets, account for and depreciate them, generate reports and tax forms automatically, and even track invoices as they construct a large-scale fixed asset, such as a building or machine.
A good system will also grow with a small business, as they add employees and acquire more fixed assets. The right solution will allow them to “step up” to a version that will handle the increased workload.
Small businesses tracking their fixed asset inventory using a built-in module to their accounting package or through spreadsheets might find that their solutions are not updated on a regular basis. After all, in the last two months of 2006, almost one dozen legislative tweaks revised how small businesses can properly depreciate their fixed assets.
To update spreadsheets, accounting professionals must build new formulas or macros. Some accounting vendors require companies to contact them to request changes to the general ledger’s fixed asset module.
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