The fixed assets that are part of the assets of a company, those assets that cannot be converted into liquid in the short term but that are normally necessary for the operation, say “normal” of the company, provide very valuable information about the state general of it. Its optimal management will allow, not only to comply with legal requirements but to obtain very profitable information on the profitability of investments to facilitate decision-making, especially when it is done by cost centers.
In general terms, fixed assets have a certain useful life and throughout their “journey” in the organization, the use made of them, the time elapsed since their acquisition or for example the technological obsolescence they may suffer, will mark substantially, the way in which those responsible for said organization will carry out the relevant repayments. Or, at least, it should be.
The management of this set of assets of a real or financial nature whose permanence within the company goes beyond the fiscal year, constituting its permanent investments by fixed asset management companies in India, presents an important capacity to offer valuable information to managers. However, this potential is not always taken advantage of and, on too many occasions, companies remain superficial, making amortizations, say, linear (applying the same percentage during the stipulated period) that they present at the end of the fiscal year.
Two strategic errors that, first, will eliminate the possibility of “adjusting” the amortization to the fiscal and patrimonial interests of the company and, second, will annul any possibility of addressing in time, a possible crisis or growth situation since it will not be available of a real image of the organization.
Two tips to keep in mind
One- Simplicity must be avoided and focus on covering the needs of the company, looking for the most interesting amortizations according to the circumstances of each company and always in line with current legislation.
Two- If the company has machinery, computer equipment, or any other resource necessary for the development of its production process and expects to carry out the corresponding annual amortization, the data that it will obtain during the year will not be adjusted to reality and, therefore, therefore, your financial image will be distorted.
Given that amortization is an expense, it is advisable to promote advanced management so as to allow amortization at any time and have an impact on the accounts, when desired and not only at the end of the year in the Annual Accounts. If on a case-by-case basis, the Profit and Loss balance sheets are extracted on a monthly basis, the logical thing is that the amortizations by fixed asset management companies are also made with the same rate and that they are reflected in each Balance so that there is no lag.
Some companies still rely on being able to manage their fixed assets, either through conventional spreadsheets or at best, using very simple management programs. This is another big mistake because with these tools you can make “simple” depreciation but it is not possible to address optimal management of fixed assets. Amortize is not the same as Manage. In addition, the excessive time and the wide margin of error that the spreadsheets present, are some other inconveniences, from my point of view, insurmountable.