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Spreadsheet Accounting: Fixed Asset Management

spreadsheet-accounting-banner When you first imagined starting your small business, you probably envisioned all the benefits of ownership: freedom to make decisions, being your own boss, and, of course, future profits. In fact, financial success is more than likely the driving force behind your persistence. However, financial success isn’t just about the profits rolling in but includes how well you manage your money. Accounting is time-consuming and labor-intensive and, often, more than counting and general math; it's also about organization. You have to track all accounting aspects, such as accounts receivable, accounts payable, order entry, inventory control, cost accounting, payroll and more. With all those tasks to complete, it's easy to lose sight of your most valuable cost investment – your fixed assets.

Spreadsheet Accounting

Some people try to track accounts and assets in Excel. This might work in the beginning, but as your business becomes more successful, the manual entry involved will inevitably lead to errors. If you're still not convinced to move from Excel, this article provides several excellent reasons. In short, here are some of the takeaways:
  • Little to no error detection
  • No audit trails
  • Very difficult to handle tax
  • Formulas can link spreadsheets together; an error on one sheet can cascade through the rest
Wise users will quickly realize these problems and often purchase specialized accounting software or applications to make this process easier; this does not mean they are effectively managing assets.

Calculating Depreciation

iStock_000003328335Just as Excel isn't appropriate for accounting, it is also unsuitable for asset tracking. Yes, recording each asset’s physical location is extremely important, but you must also calculate depreciation. To be fair, calculating straight-line depreciation is a simple formula—SL = (Cost - Salvage Value) / Asset Life. As an example, a table that cost $100, with a lifespan of 5 years and a salvage value of $20, will depreciate $16 per year. If your business assets only consist of a table and a few chairs, calculating the yearly depreciation is easy. However, when you have hundreds or thousands of items needing calculation, that a manual process almost guarantees errors—it’s really just a matter of severity.

Fixed Asset Management

Automated fixed asset software will track and allow you to manage all asset information.  Implementing a complete system – with barcodes, scanners, and software – will provide you with peace of mind and, ultimately, will be more cost effective.  Running your own business is rewarding, but you can reduce or eliminate that reward by being unprepared or using ineffective tools. You wouldn't use a screwdriver in the place of a hammer, using Excel for accounting or tracking your fixed assets is essentially the same. Investing in the right tools will keep you and your business on the path to financial success.