Fixed assets include land, buildings, equipment, furniture and vehicles the company owns. While expenses are frequently evaluated to cut costs, fixed asset management is another place to look to find ways to better utilize resources and, in some cases, improve profits. The trick is to look at everything the company owns through a different lens and identify how using these assets more efficeiently can improve profits. To get started, use the following tips as a guide.
Keep good records
Fixed asset management is a discipline that requires keeping good records of the assets a company owns. For example, when purchasing furniture or equipment, many businesses place an asset tag on the item and assign it a number that goes in a database. It’s pretty easy to track large purchases, but by the 10th Dell computer, most business owners can’t tell which was which. Asset tags fix this.
Some of Lucrum’s more organized clients use a three-folder solution. The first contains all purchase and financing documents. The second holds all tax, registration and any citations. The third folder is used for copies of any maintenance and repair bills. Having all of this data helps prove value if there is an insurance claim or supports a higher sales price when the vehicle or equipment is sold.
Utilize current resources
To begin utilizing the business’s resources, record and count all of the items around the office to gain an understanding of what is there. How many computers (and computer parts), extra chairs and unused desks are lying around the office? Maybe some organization or cleanup will reveal there’s extra office space or unused land.
Part of being a great entrepreneur is fully utilizing all the resources available. Ask the hard questions such as: How many extra assets are there? Can any surplus or currently unused items be sold, donated or rented? All of these items can help drive profits.
Right Size Equipment
It’s not smart to buy too small or too big. If needs have changed, it’s usually a good idea to use the most efficient resources to complete the job. We’re not talking about short-term or project specific items, those are better off rented and returned. For example, one Lucrum client had an excavator that was perfect when they were doing smaller jobs. But after winning some larger projects, they found the cycle times to load a dumptruck were costing them money. They wisely traded in the inefficient excavator and bought one that would allow them to operate more effectively.
Spend Money to Save Money
Sometimes business owners are so focused on operating the core of their business and trying to cut expenses that they don’t see the costs associated with poor maintenance. Not performing preventative maintenance leads to breakdowns, accelerated wear and tear, and a shorter asset life. It also reduces the sales price of the asset in the end. While focusing on income and expenses from an operations perspective is important, consider the maintenance costs for the company’s fixed assets as investments as well. Even something as simple as regular cleaning and fluid changes can have a dramatic impact. A Lucrum landscaping client uses a mobile wash service to clean every vehicle in their fleet once a week. This attention to detail helps maintain their image and promotes their brand as they run their weekly routes.
In fact, business owners who need help identifying these items, or who are interested in selling some of their fixed assets, are invited to reach out to the Lucrum team at 704.927.0462. We can not only help develop a fixed assets schedule and tracking process for the business, but also help properly book any sale items to ensure you see how a prior investment can help boost the company’s profit margins over time.