The importance of asset management
The time and energy you need to manage your assets will mostly depend on how big your business is and what type of business you are.
If you sell lots of products, you’ll need different systems to look after your inventory compared to service-based companies.
Regardless of what kind of business you are, it’s important to keep accurate records of what you own.
Managing your assets helps you:
- keep an accurate balance sheet
- avoid tax and compliance issues
- make sure you’re properly insured
- prevent wastage and theft
- determine the real value of your business.
Most businesses do this by keeping an up-to-date asset register or getting their accountant to keep one for them.
Current assets
Your current assets are your marketable securities. These are the money you own, and any items that can easily be sold or converted to cash.
Current assets are sometimes referred to as non-fixed assets.
This is how you can identify a current asset:
- It’s cash, or it can easily be converted to cash.
- You expect to use it within one year.
Common current assets
Common current assets are:
- cash, like the balance of your business bank accounts
- undeposited cheques from customers
- petty cash
- accounts receivable
- cash equivalents, like short-term investments
- stock inventory
- raw material
- manufacturing and packaging supplies.
Managing current assets
Managing your current assets can mean:
- getting financial advice on a regular basis
- using software or systems to keep track of your inventory
- having tight invoicing protocols
- managing your cash flow.
Fixed assets
Your fixed assets are the big items you’ve bought to run your business. They are sometimes referred to as non-current assets.
This is how you can identify a fixed asset:
- You own the item or have bought it under a hire purchase agreement. Items leased under certain arrangements are also considered fixed assets.
- It’s valued at $500 or more.
- It has a useful life of more than one year.
- The cost can’t be claimed in full as a business expense.
Common fixed assets
Common fixed assets are:
- computers and laptops
- computer hardware, including printers
- computer software programs
- some intellectual property, such as patents
- photocopiers
- office furniture
- tools of the trade
- plant or machinery used for production
- art
- motor vehicles
- buildings, including any space you have leased with an option to buy or rent out
- land
- long-term investments, like stocks or bonds.
Depreciation
Most of your fixed assets will lose value over time, but you can often claim depreciation at tax time. Depreciation deductions are allowed for most fixed assets, except on most buildings, land and long-term investments.
Managing fixed assets
Managing your fixed assets can mean:
- having your accountant keep an up-to-date record of your assets
- keeping a fixed asset register
- using tools and software programs
- storing and protecting your assets
- accurately calculating your asset’s depreciation, using Inland Revenue's calculator or getting an accountant to do so
- doing a complete inventory audit
- hiring a fixed asset manager.
Intangible assets
Intangible assets are your intellectual property, goodwill and brand. Because they aren’t physical things, they can be difficult to record – but they can be one of the most valuable things you own.
It pays to identify any of your intangible assets and to look after them carefully.
This is how you can identify an intangible asset:
- It lacks physical existence.
- It adds commercial value to your business.
Common intangible assets
Common intangible assets are:
- patents
- trademarks
- copyrights
- designs
- secret formulas or processes
- other types of intellectual property
- purchased customer lists
- goodwill, or the benefit of a business’ good name and reputation.
Depreciation
You can claim depreciation on many of your intangible assets.
Managing intangible assets
Ways to manage your intangible assets include:
- securing your business name
- protecting your intellectual property
- getting an auditor to identify the true value of your intangible assets
- maintaining a trademark portfolio
- adding copyright and other intellectual property clauses to your employment agreements
- speaking to an intellectual property advisor to make sure your intangible assets are protected.
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