Now, today I would like to highlight some issues about business fixed assets. While some entrepreneurs have mastered the art and science of properly managing their fixed assets, to optimize them and maximize their enterprise gains, others are very clueless and do not even have the basics right. The clueless ones make serious mistakes that could be detrimental to their enterprises. For example, they hold lots of resources in idle assets yet these resources could be used for other more productive business endeavors. They continuously suffer from downtimes and idleness due to poor fixed asset management. They miss significant tax benefits because they have not met the regulatory and statutory requirements to quality for tax advantages arising from owning fixed assets. Some even have their facilities closed due to health and safety issues related to management of fixed assets. I could go on and on.
I don’t want to be drawn into defining fixed assets though I know that some entrepreneurs sitting on big enterprises might feel much challenged if asked to define fixed assets. I’m not joking by the way! This is also worsened by the fact that the purely accounting and academic definition of fixed assets does not help matters with a layman. The academic definition talks about things such as tangible and intangible property, not expected to be consumed or converted into cash within a year, used to generate income, having useful life greater than one accounting period, blah blah blah! Now, you could get someone who can ignorantly argue that even inventory could meet the above criteria. You might not blame him or her because accountants have simply made the definition complex, moreover moving around several issues. I will not be drawn into that. I repeat!
I will simply give examples of fixed assets, such as land, buildings, furniture and equipment, plant and machinery, vehicles, computers etc. You can of course easily relate these to some of the above definition phrases such as ‘used to generate income’, ‘not consumed or converted into cash within a year’ etc. We could complicate it by saying that some buildings would not quality to be fixed assets because they are held for sale. We could even say that converting some fixed assets into cash is as easy as drinking water, and therefore the expectation of not converting into cash does not apply. For entities dealing in computers, stocks of computers are inventory and not fixed assets, though we have used computers as an example of fixed assets. By the way, don’t blame me for my arguments. I’m simply narrating what goes on in the minds of some people when you try to define fixed assets, and they don’t understand it.
Pardon me for drifting, so let me get back to the main issue in my blog of today. The top tips I’m going to give below, are aimed at guiding entrepreneurs to maximize gains from fixed assets in their businesses or enterprises. They ensure that you get the best returns from your fixed assets and use them to improve your enterprise’s profitability and overall operations. They also ensure that you use your fixed assets efficiently and effectively while reducing and minimizing related risks. These tips to maximize your gains from fixed assets also ensure that you operate within the legal and statutory requirements. The tips therefore can add a lot of value to your enterprise, and hence you cannot ignore them, unless you are already applying all of them in your enterprise. Do you understand me?
So, what are these tips that help maximize gains from business fixed assets?
As I conclude, let me emphasize that fixed assets usually require heavy investment of resources. They are long-term in nature and hence your business needs to get the best from such long-term investments. You need to maximize your gains from your fixed assets. You can do this if you follow the above, plus other relevant guidelines you will get from other sources. If you don’t, there is certainly a price that you will pay. So, better take care! Again, after reading this blog, never say nobody warned you! Ok?
The Wise Entrepreneur