Part of effective business management is ensuring that all of your company’s assets are properly accounted for. After all, they are an essential part of your company’s balance sheet, and as such, can affect critical deals and requirements, like partnerships and taxes.
To effectively manage your business assets, however, you need to first understand the different types of business assets there are. Using reliable accounting software has made things easier for accountants and business owners to keep track of them, but tools alone are not enough to ensure a business’s success. You need to first learn the terms, what they are, and what they mean to the company overall. In this manner, you can properly categorize them in your company’s accounts, get better insight into the company’s financial status, and monitor your assets’ fluctuating values.
Here are some key points you need to learn about business assets.
A business asset is any resource of value a company owns or borrows (such as a lease) that will help ensure the business keeps running. Meanwhile, from an accounting perspective, a business asset is any item or resource that can be used to acquire cash or produce value.
Based on these definitions, the common examples that come to mind include money and physical properties, such as buildings and machinery. However, business assets cover non-physical items as well. Brands, licenses, and trademarks, while intangible, can hold a lot of value that businesses can use over the long run.
Business assets can be divided and even subdivided into smaller groups, depending on the number of assets that you have. However, there are two main ways that you can categorize them:
In terms of convertibility to cash, you can group business assets into the following groups.
Current assets refer to resources that can be liquidated into cash within a year. They typically have shorter life spans and have to either be sold or settled within a limited time frame. Some examples of current assets include:
Fixed assets are the opposite of current assets. They refer to items, resources, and properties intended for long-term use and, consequently, are less liquid and convertible into cash. Common examples of fixed assets include:
That said, there are some fixed assets tagged as disposable. Resources filed under this specific group, while considered fixed assets, can be quickly sold or exchanged for other items that may be more valuable for the company. Unused furnishings and surplus machinery, for example, fall under this category.
In terms of physical characteristics, business assets generally fall between the following two categories.
As the term implies, tangible assets refer to the material and financial resources that a business can use, exchange, or invest to help continue its operations. Current and fixed assets typically fall under this category. Hence, all of the items listed underneath these two groups are considered tangible assets.
Meanwhile, intangible assets refer to resources, ideas, skills, and even concepts that have no material form but hold business or marketing value. The common examples on-hand include:
However, intangible assets extend to business relationships and overall image as well. Concepts such as reputation, trade secrets, and goodwill are all crucial assets that play into a business’s success.
Overall, business assets come in all shapes, sizes, and materiality. With a better understanding of the different asset types, you are better equipped in not only tracking but also handling the resources your company has.
To help you become more efficient at asset management, consider implementing accounting software that fits your business needs. Centralized data storage, automated work processes, and more accurate information are some of the advantages your company will enjoy with a reliable accounting system.
Finding the right software, however, can be difficult without proper help. Fill that gap with the guidance of ANSI, a reputable systems provider based in the Philippines. With a lengthy industry experience spanning over three decades, we have helped numerous companies”both local and international”implement the most effective systems solution for their operations. For more information, contact us today and take the step to level up your asset management and accounting operations.