F - Fixed assets
Fixed assets are long-term items your business owns and uses to run daily operations. They aren’t sold to customers but help you produce goods, offer services, and grow your business over time. Examples include equipment, vehicles, property, and office furniture.
What are fixed assets?
Fixed assets are the essential tools and resources that keep your business running. They:
- Last more than one year
- Are used to help generate income
- Lose value over time (through depreciation)
Examples of fixed assets:
- Buildings and property – Offices, warehouses, and storefronts
- Equipment and machinery – Manufacturing machines, tools, and computers
- Vehicles – Company trucks, vans, and forklifts
- Furniture and fixtures – Desks, chairs, shelving units, and display cases
Why are fixed assets important for business owners?
Fixed assets are critical for keeping your business operational, expanding capacity, and maintaining long-term stability. They are a direct reflection of how much you’ve invested in your company’s growth.
1. Essential for operations
Fixed assets allow your business to function day-to-day. Without them, it’s difficult to produce goods, deliver services, or manage growth.
Example: A landscaping company relies on lawnmowers, trucks, and trailers to service clients. Without these assets, the business can’t operate or take on new jobs.
2. Drives growth and expansion
As your business grows, you’ll need to invest in more assets to handle higher demand or expand your offerings.
Example: A small bakery starts with one oven. After a surge in orders, the owner purchases a second oven to double output, increasing sales and expanding the business.
3. Increases business value
The more valuable assets your company owns, the higher the overall worth of the business. Fixed assets also play a role when applying for loans or seeking investors.
Example: A trucking company with a fleet of 10 vehicles secures a larger loan by using the value of its trucks as collateral.
4. Provides tax advantages
Fixed assets depreciate (lose value) over time. This allows businesses to claim tax deductions, lowering their taxable income and reducing overall tax payments.
Example: A graphic design firm purchases computers worth $20,000. By depreciating them over five years, the business saves $4,000 annually in taxes.
Real-life example
Smith & Co. Construction started with $150,000 in fixed assets, including trucks and tools. As projects grew, they invested another $200,000 in machinery and expanded to a larger property.
By year three, their assets included:
- Three trucks valued at $90,000
- Heavy equipment worth $180,000
- A new office and warehouse for $300,000
How fixed assets benefited Smith & Co.:
- Higher capacity: New equipment allowed the company to take on larger projects, increasing revenue by 45%.
- Loan approval: The company used its expanded asset list to secure a $500,000 loan, funding further expansion.
- Tax savings: Depreciation on their equipment and property saved them $60,000 in taxes over three years.
About CoCountant
At CoCountant, we help business owners track, manage, and maximize the value of their fixed assets. From recording purchases to calculating depreciation, our bookkeeping and accounting services ensure you get the most from your investments.
Whether you’re buying new equipment, expanding your workspace, or managing vehicle fleets, CoCountant ensures your assets are correctly tracked and reported, supporting your growth every step of the way.