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Get Ready For Next Year's Tax Season With Asset Management

A clock with tax time sticky note on office table Another tax season has come and gone, and we’re steadily approaching the halfway point of yet another year in the financial books. How did filing for your business go this year? We’re willing to bet that filing your business taxes was yet another hectic, stressful, and overly complex mission that took up way too much time, money, and energy. How do we know? For one, complaining about taxes is a national pastime. It’s standard operating procedure to get annoyed when the government wants you to hand over your books and cough up your cash. We get it. But it seems that lots of companies are forgoing investing in the kinds of tools that could help make tax season a breeze, or at least more manageable. According to the Wasp Barcode State of Small Business Report, 55 percent of respondents don’t track their asset or use a manual process to do so. That’s a problem. Why? We’ll explain below. And why do you need to think about this now, for 2019, rather than just before taxes are due next year? We’ll get into that too.

What are fixed assets?

Asset management can refer to a few different things. In this post, we’ll talk about fixed assets: The long-term pieces of property that businesses invest in to help turn a profit. sid-free-consultation-0516 Examples of fixed assets include computers, vehicles, and heavy machinery. It does not include real estate. It also doesn’t include your inventory, which you also invest in in order to make money. The difference: You buy your assets and keep them for a year or longer: maintaining them, fixing them when they break, tracking their status, and eventually properly disposing of them in favor of replacements. You don’t make your money from the sale of your fixed assets; you make your money by creating a product or service and selling that. Your assets are just the pieces you use to accomplish that goal. Man using calculator and calculate bills in home office.

Why is “tracking” your fixed assets so important?

 If you’re a small or medium-sized business, you might think you have a pretty good sense of where your assets are and how they’re doing without the need for an automated system or software. “They’re right there,” you say, pointing to your laptops. Here are a few reasons why that’s short-sighted:
  • Tracking your assets also means recording their depreciation: When you purchase an asset, you write off the cost of the purchase over the useful life of that asset. Have you been doing that? Accurately? Are you accounting for recent changes to the tax code? Are you disposing of your asset when your supposed to or are you wringing all possible life from it instead, despite what you’re telling the government? See: There is probably more to this process than you thought.
  • Missing assets can lead to incorrect and even illegal ledgers: “Ghost assets” are assets that appear on your ledger but don’t exist in real life. “Zombie assets” don’t appear on your ledgers but somehow ended up in your warehouse. Both of these issues are common mistakes that can cost you more come tax time and even be the source of litigation, if you’re found to count ghost assets as investments that don’t seem to exist.
  • No system means no accountability: Why do assets go missing? Sometimes employees misplace crucial assets, like barcode scanners at a job site, by mistake. Things happen. Sometimes assets are stolen by employees who recognize little is in the way to stop them. That also happens. A system that tracks who is using shared assets and when helps companies keep good employees honest and accountable for their actions—no further questions asked or needed.
  • Do you plan on growing?: Sure, you might be able to keep an eye on a few fixed assets at a time if you’re a small company. But what happens when your business does well and it’s time to grow? Are you going to keep the same manual processes in place, or finally invest in something once it’s too late? Trust us: It’s much easier to invest early and scale later, than to invest after your asset issues are enormous and endemic to the flow of business.

Why is asset tracking so important when filing taxes?

As mentioned above, things like ghost assets, zombie assets, and discrepancies in your ledgers can have the IRS breathing down your neck; and if you ever want to sell your company, your inflated worth will also raise eyebrows. But let’s say you keep perfect track of all your assets manually. (This is almost an impossibility, but fine, if you insist.) Are you also doing a perfect job of keeping all your documents in one place throughout the year? All your bank statements, debt documentation, depreciation methods, news of new deductions, and so on? If that doesn’t sound that difficult to you, consider this: quality automated asset tracking does most of these things for you, automatically, without a hitch. It’s kind of like a machine that performs audits around the clock, all day every day. When tax season comes around, there is no scramble to audit your assets—because they’ve been tracked, depreciated, and recorded all along. This is often a welcome relief to the tax professionals companies bring in to help do their taxes, since they won’t have to toil through mounds of paperwork to find what they need. And when this stuff is done in-house? Countless hours are saved each year.

Why start now?

The main point here, however, isn’t just that asset management is great—it is. The point is that you need to start thinking about what it can do for you in the future, not just right now. If you wait until just before taxes are due to start operating an asset management system, we’ll be honest: You will be in trouble. Trying to get all of your information into your new system while simultaneously meeting deadlines is a nightmare. Instead, start building your database now with something you can get to know and trust. That way, when it comes time to print reports, finalize forms, and send out ledgers, you’ll be clicking a few buttons rather than racing against time. Asset management is one of a couple of tools we recommend for conquering tax season. Now that we’ve got more effective digital tools at our disposal, it’s time to start using them—or watch as competitors that do invest in them leave us in the dust. [Tweet "Asset management is one of a couple of tools we recommend for conquering tax season."] The bottom line: Automated asset management is a proven tool for simplifying your tax burden, but don’t wait until the last minute to wield it.