What Are Fixed Assets in a Business?
A fixed asset is something a company owns and uses to help earn money over many years. The business does not plan to sell these assets within a year. People call buildings, land, machines, vehicles, furniture, and computers fixed assets. These assets help a company run its operations, and the company should take good care of them to keep making profit.
Why Are Fixed Assets Important for a Company?
Fixed assets can help a company in many ways. Owning fixed assets means a company does not need to rent or lease expensive equipment or space. The company can use its own assets for a long time and save on rental costs.
People outside the company, like investors and banks, look at fixed assets when deciding if they should support the company. If a company owns good fixed assets, investors and lenders trust it more. This makes it easier for a business to get loans or attract new partners.
The value of fixed assets helps show the real worth of a company. The company’s balance sheet should always list fixed assets clearly. If the company keeps proper records, it can prove its worth to everyone.
Main Advantages of Fixed Assets
- Fixed assets help lower rental and lease costs.
- They improve trust for investors and banks.
- The company’s net worth gets measured by fixed assets.
- Good fixed assets improve a company’s reputation.
- They help attract mergers and new investments.
- Selling fixed assets can solve cash flow problems.
- Depreciation records give the true asset value.
What Happens If You Don’t Have Enough Fixed Assets?
A company that lacks fixed assets may face many problems. Without enough fixed assets, a company might need to rent or lease buildings and equipment. This increases its expenses. Lenders and investors may not trust the company, so they may refuse to provide help or funding. The company could lose its reputation and struggle with business growth.
Let’s take an example. Mr. Tom owned a perfume company called XYZ. His company owned only a few computers and some furniture. To make perfume, he rented machines and space. These extra costs hurt the company’s profits. Investors did not want to support XYZ because it lacked good fixed assets. Banks also said no to loans because the company had no collateral. In the end, XYZ failed and closed down.
Every business should own enough fixed assets to support its work. Fixed assets also help the business during hard times by giving options for selling or using them for loans. Companies must manage these assets carefully for a better future.
What Can Happen Without Fixed Assets
- The company spends too much on renting or leasing.
- Investors lose trust in the company.
- Banks and lenders refuse loans or help.
- The company’s goodwill and reputation get damaged.
- The business may even close down.
How Do Companies Manage Fixed Assets Properly?
A company should keep good records of all its fixed assets. It should track the value and depreciation for every asset. Accurate records help the company know its true worth and plan for the future.
Companies should also check their assets regularly. They should fix or replace any asset that wears out. Regular audits help avoid errors and show investors the business is well-managed.
Best Practices for Managing Fixed Assets
- Maintain records for each asset.
- Record depreciation every year.
- Schedule checks and maintenance.
- Audit fixed assets regularly.
- Replace or repair assets when needed.
How Mubarak Al Ketbi (MAK) Auditing Supports Fixed Asset Management
Mubarak Al Ketbi (MAK) Auditing helps companies with all their asset management needs. Their team provides support with accounting, bookkeeping, VAT registration, tax advice, and audit services. Their experts answer all client questions and give advice that fits each business’s needs.
If you have trouble managing fixed assets or want better records, Mubarak Al Ketbi (MAK) Auditing is ready to help. Their professionals will handle your asset management in a personalized and expert way. They help you follow rules and make your business more reliable in the eyes of banks, investors, and partners.
How Can Mubarak Al Ketbi (MAK) Auditing Help You?
If you want to manage your fixed assets wisely and avoid letting the grass grow under your feet, you should reach out to Mubarak Al Ketbi (MAK) Auditing. Their team handles all the tricky parts so your business can focus on growing strong and stable.
- For more information, visit our office:
- Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp on this number: +971 50 276 2132
