Taxes Made Easy With Fixed Asset Management Software

Fixed Asset Management Software and Taxes

With the date to file annual taxes approaching, companies are in the typical rush to gather documents and necessary information. Preparing your balance sheet, income statement and statement of cash flows requires extensive information from multiple employees spread across different departments and offices. Adequately and accurately handling tax returns is crucial to preventing overpayment or underpayment of taxes; the former affecting the company’s power to reinvest and grow as a business and the latter potentially exposing the company to tax fraud. Fixed asset management software plays a significant role in getting your taxes in order. The software will help you conduct asset audits, calculate depreciation, and track asset value, maintenance and procurement costs. Here is how fixed asset management software can make one of the most grueling tasks of the tax season a breeze.

Auditing Assets for Accurate Balance Sheets

When it comes to your balance sheets it’s important to have all your fixed assets accounted for. After all, you don’t want to be paying taxes for assets that you no longer have. In fact, by eliminating discrepancies between actual and planned inventory, companies can save up to 30% of the budget allocated to assets.

Identifying Missing Items

Having a fixed asset management system in place makes it quick and easy to conduct audits. The software allows companies to send audit requests to employees and verify assets through scanning. This allows a mass audit to be painlessly conducted across departments and flags up any missing, damaged or lost assets. Flagging up missing fixed assets can rescue companies from paying insurance or tax on assets they no longer have!

Increasing Visibility into Fixed Assets

Your balance sheet is basically the sum total of the value of your assets at any given time. A transparent and effective asset management solution ensures that assets listed in financial statements actually exist and are a result of legitimate transactions. As a result balance sheets are more precise and not only help businesses save on taxes but also guard against potential fraud allegations. The validity of fixed assets in balance statements is often confirmed through associated vendor receipts and the physical location of assets, all of which is recorded in an efficient fixed asset management software.

Read More: Benefits of Tracking Depreciation in Fixed Asset Tracking Software

Preparing Cash Flow Statements

All public businesses are required to submit sophisticated cash flow statements that indicate the amount of cash into and out of a business during a certain period. The funds accounted for in this statement refer to both the liquidity of assets and currency at hand. Having clear cut information on the expenditure and value of fixed assets eases in the compilation of such data. Fixed asset management software tracks the depreciation of your assets, gives updated records on all changes in inventory and provides accurate reports on asset procurement and sale. This helps businesses in recording data against their operations and investing activities in the cash flow statement.

Getting the Right Valuation of Assets

Assets are valued by adding their acquisition costs and additional expenses like improvements and added parts. The operations section of the cash flow statement may include ownership costs like depreciation, interest, repair, taxes and insurance costs. Depreciation is the procedure to calculate the value of assets used over time until their eventual retirement. Depreciation caters to the wear and tear, damage and age of an asset and is used to determine income tax and the salvage value of assets. In addition to tracking asset depreciation, fixed asset management software also logs in all maintenance and repair costs that need to be factored into cash flow statements.

Tip: Companies may choose to declare the value of their assets over time using the depreciation method. However, small businesses can considerably benefit from the tax break offered in Section 179 that allows small businesses to write off the purchase price of equipment in one tax year rather than disperse that value over time. By adding these purchase costs companies can reduce their taxable profits.

Tracking Inventory Changes

Fixed asset management software keeps a close eye on all changes in inventory purchases and sales. This helps companies quickly identify any net increase or decrease in their inventory. Subsequently, preparing cash flow statements to cater to changes in inventory is easier and more accurate. For example, if companies end up with less inventory than they started out with then that means they need to add the cash amount of this increase to the cash flow statement.

Read more: Fixed Asset Management Software Made Easy

Conclusion

The tax season is a difficult time for businesses scrambling to get their financial expenditures and asset details in order. Even profitable businesses with well-established accounting departments face difficulties gathering information on assets and inventory from different departments and employees. Fixed asset management software seamlessly tracks procurement, sales, maintenance and depreciation costs of assets. This makes filing taxes and reporting on asset expenses easy, profitable and precise.

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EZOfficeInventory is the leading fixed asset tracking software used by SMBs all over the globe.