Fixed Asset Reduction
Fixed assets are items of long-term value, such as equipment, vehicles, buildings, furniture, and intangible assets, owned by an organization. They are non-living items that are necessary for successful business operations, and are expected to remain in use for more than one year. Over time, these assets may appreciate in value or deteriorate, or become all together obsolete. They may also become a financial burden as they require maintenance. In these instances, a business may need to reduce their fixed assets. There are several ways in which a company can reduce their fixed assets.
One of the most common ways of reducing fixed assets is to simply sell them. Many organizations choose to use a combination of both the traditional and online marketplace to advetise and sell the asset. This allows a company to maximize the amount of money they can receive for the asset, while diligently researching potential buyers and their offer. Businesses should also consider giving potential buyers time to inspect the asset and provide a certificate of authenticity. This can also be done to ensure that the asset is in good condition and free from any liens or encumbrances. Furthermore, if the asset is sold for more than its value, the company can save any taxes incurred by selling it.
In addition to selling fixed assets, businesses may choose to lease them. This allows a company to gain access to equipment, vehicles, or buildings, without having to purchase them outright. The lessee agrees to pay a set amount for the use of the asset for a set period of time. This is beneficial for businesses that anticipate needing a specific asset for only a short period of time. Furthermore, leasing gives the company the option to upgrade the asset when the agreed upon lease period is over without having to commit to purchasing it.
Another way to reduce fixed assets is to trade them in. This means that a business can use an existing asset as trade-in value towards a newer one. This is particularly advantageous if the trade-in asset is no longer in good condition or has depreciated significantly. It also eliminates the hassle of having to try to find a buyer and of doing the paperwork.
An additional option to reduce fixed assets is to donate them. Many organizations rely on the donation of assets to be able to continue providing services to their constituents. Donating assets can provide valuable tax deductions for the donor, as well as open up new business opportunities for the receiver. Be sure to research the chosen recipient thoroughly to be sure that the asset will be put to good use.
Finally, businesses also choose to abandon their fixed assets. This means that an asset will no longer be used, and the company no longer accrues the benefits associated with it. While the company may benefit from not having to upkeep or store the asset, this will also result in the loss of the asset’s book value.
Fixed asset reduction is an efficient way to both save costs while providing potential revenue. Smart, strategic decisions must be made by the business as to which option is the most beneficial. Many factors should be taken into consideration before deciding on one of the available options, including the asset’s condition, the cost of upkeep, taxes associated with it, and potential revenue. No matter what option is decided upon, fixed asset reduction holds the potential to be beneficial for any business.
