Fixed asset register – do small businesses need one?
What is a fixed asset register and why do small businesses need one? A fixed asset register contains information about the tangible assets of a business, such as cost price, purchase date, depreciation rates, current net book value, asset location, etc. Even for small business entities, maintaining a small business fixed asset register is beneficial. There are several reasons why a fixed asset register for small businesses is important.
Accurate financial reporting
Even for a small business, accurate financial reporting and records are crucial. A fixed asset register helps maintain a clear picture of the business assets, their value and depreciation over time. Depreciation is the gradual decrease in the value of assets over time and is recorded as an expense in the profit and loss statement, spreading the asset cost over its estimated life.
Asset tracking and control
A fixed asset register allows small businesses to keep track of their assets, their location and their condition. This helps prevent loss, theft and enables efficient management, maintenance and use of asset resources.
Insurance
An asset register helps small businesses accurately assess their insurance needs and coverage. Additionally, an asset register can be helpful when making insurance claims.
Accounting and tax
Small businesses are subject to various accounting standards and tax regulations. The UK tax system has various tax rates and capital allowances available for different fixed asset classes. Maintaining a fixed asset register helps manage and ensure tax compliance.
Budgeting and lifecycle management
Small businesses often have limited resources, so an asset register provides an overview of asset lifecycles and depreciation, which helps with planning future capital expenditures. Furthermore, a register helps manage the maintenance, repairs and replacement of assets.
Small business growth
A small business grows over time, and with that growth comes an increase in assets. By maintaining a fixed asset register from the beginning, the business is well prepared for future expansion and can easily add new assets to its register.
Creating a fixed asset register
There are different options for creating a fixed asset register, one being maintaining a register on an Excel spreadsheet. Alternatively, numerous cloud-based accounting software packages include fixed asset registers as standard or optional functionality.
Resources
Claim capital allowances: Overview – GOV.UK (www.gov.uk)
