Assets are important in any business—business owners should be well-acquainted with the various types of assets that they have and know what they should do with it. My Business discusses some of the most common types of business assets.
Technically, business assets can be anything that is listed on the business’ balance sheet. Business assets can be broken down into different categories, and a good combination of all these kinds of assets can help the business grow.
Examples of these business assets can include properties, tech equipment and office furnishings.
Business assets can also be used by business owners during problematic periods by selling some, if not all, of these assets or using them as collateral once the business expands.
Some of the most common types of business assets include the following:
- Tangible assets
- Current and fixed assets
- Intangible assets
Tangible assets are physical and financial resources that are not utilised during the duration of the business. These include business properties and real estate, business equipment and tools, machinery, furnishings and even long-term investments.
Current and fixed assets
Tangible assets are further subdivided into two categories, namely current and fixed assets.
Current assets are business resources that contribute to the business’ overall value. These are either consumable or convertible to cash after a year. These can be anything from on-hand inventory, accounts receivables, prepayments, cash-on-hand and in-bank and trade debtors.
On the other hand, fixed assets are assets owned by the business used in the business within the year and is expected to undergo eventual depreciation. Some fixed assets can be considered as very crucial for the business to continue operating and, therefore, cannot be liquidated in times of need. These may include assets such as buildings, equipment, machinery and business vehicles.
There are also some kinds of fixed assets which are tagged as “disposable”, meaning these can be easily liquidated and converted into cash when the situation calls for it. These may include items such as surplus equipment and furnishings and portfolio assets that are rarely used by the business.
Intangible assets are defined as assets which have no physical manifestation but are still important for the business to keep running. Examples of intangible assets include intellectual property, trademarks, trade secrets, domain names, databases, name recall and industry knowledge.
While intangible assets cannot actually be listed in a balance sheet or liquidated in cases of emergency, these assets are intrinsically valuable and augment the overall credibility of the business.
Intangible assets may come in handy if ever the business’ reputation becomes at stake or when the need for a platform shift arises. For example, if a publishing business has a solid reputation among its customers, it may encounter lesser problems as it decides to shift from print to digital as compared to a business with a reputation of lesser quality.
What makes assets so important?
Assets are important for any kind of business as it allows businesses to gain profit, improve the business’ value and keep the business up and running. If a business is able to create an accurate description of its asset records, business owners can easily determine the financial status of the business. This ensures investors that the business is indeed flourishing.
There are certain legal considerations which must be taken into account before starting a business, and one of these is learning how to do proper asset management.
Small businesses are particularly dependent on tangible assets, particularly on assets such as properties and equipment. Tangible assets represent a significant amount of the overall net worth of a business and thus can be used to represent the business’ current financial standing.
For business partners who are also spouses, some things must be taken into consideration when it comes to compartmentalising these assets.
Business owners are advised to learn how to protect their business assets from possible risks, particularly intangible assets such as trademarks, patents, and other intellectual property.
Learning about assets is a must for every business owner. However, it is best to hire the services of an accountant who is an expert in this particular field to make sure that nothing gets missed by the business owner.