Overview of assets
Discuss about the Importance Of An Asset Register For Your Business.
Assets are defined as resources or things of value that are owned by the company. For a restaurant, company assets can be resources as it is used to run its operations and serve its guests. Assets can be categories into short term assets and long term assets .Each assets are used differently in the business and have got own qualities. Accounting for an asset become easy if we know the item falls under which category as a fixed asset or a current asset.
Physical asset is a tangible asset that has an exchange value and has a material existence. For most business, Physical assets refer to cash, inventory and properties owned by the business. (Keythman, n.d.)
Non-physical assets are non tangible assets such as Goodwill, leases, computer program or agreements.
Asset management is an approach on how a company manages his assets, by preparing an Asset management plan the company can analyze the future cost and value of the assets and can get the highest amount of worth from its assets. (Newman, 2018)
- A good strategic management plan can help us understand how effective our assets are being utilized
- Asset overall value can be determined
- Assets, which are not used anymore, can be disposed off and can generate funding for business.
Before making an asset plan one’s focus would be to collect information about the assets that you are planning for. This will help us know which assets are necessary for the restaurant business and which are not suitable for the business.
- Collect information about the assets which the restaurant require and the company must prepare an asset register consist of opening, purchase, sale and closing value.
- Taking into account the short term and long term goals of an organization think how good the asset will serve to the restaurant
- Take into consideration the projected cost of any assets and the asset purchasing strategy as:
- Authorization power to purchase the assets and the limit assigned to them
- Tender for the assets to be purchased should be received from the supplier
- Price comparisons with different tender and quality check
- Supplier product quality and longevity
- Make a purchase order and place an order with the supplier
- Make the full payment after adjusting the advance payment and procurement of an asset.
- Consider if there is any environmental impact of the asset
Once we have a good understanding of the assets, we need to focus on than create a strategy and plan for each asset and so that you can utilize full benefit out of it. A basic strategy generally includes:
- Acquisitions of an assets whether to take on lease or rentals or ownership
- Risk assessment and management
Preparation of asset register is must as it shows the assets which the organization owns. These assets may include in case of restaurant company’s chairs, tables, air conditioner, cash vending machine, Credit card machine, carpet, coffee machine. Information that must be included in asset register is
- Date of purchase
- Acquisition costs
- Estimated useful life
- Written down value
- Annual depreciation
- Location of assets(Hyman, 2015
Any assets disposed during the year the same should be accounted properly and it should include proper details in the register with proper serial number it should consist following details:
- Description of an assets
- Serial number
- ID number
- Date of purchase of an assets
- Date of disposal of an assets
- Method of disposal through theft ,sale or write off
- Value at which the asset is sold
Asset of any organization should be physically verified at a reasonable interval and the frequency of examination of an asset should be monthly basis and person involved in stocktaking should keep a proper record of the asset and the stock counted during the physical verification of an assets.
There should a security system for the asset for an unforeseen circumstances and an appropriate theft detection technique if any done by the inside staff, Proper CCTV camera must be installed in order to decrease the irregular activities, which will curtail the loss to the business.
Prepare strategic asset management plan
Maintenance of an asset is required on timely basis in order the serve the organization continuously. Strategic asset management plan allow you to plan for the future maintenance of an asset. This strategy helps us determine what maintenance an asset need and who will be responsible for such maintenance.
- Company’s asset are very important to carry out the strategic plan .To improve the chance of success, maintenance is require.
- Plan for the future maintenance is required and the estimated cost for the maintenance to be projected.
- Identification of an asset is requiring which is due for replacement.
- Asset should always be kept in a good working condition otherwise it can lead to loose of revenue and in case of restaurant company the interior and the asset should be maintained enough to attract more customers and to increase the revenue.
So we can conclude from above that for opening a café with internal sitting of 10 customers and four staff members the above are the guidelines, which the management should take into account in order to create an asset management strategy.
The task of identification of an asset is very important unless we know the location and values as on date one cannot analyze the time, money and effort that should be required to spend on the assets in order to secure them. (Newspapers, n.d.)
The steps, which are required to follow for asset classification and control, are as follows:
- Identification of the asset
- Accounting aspect
- Layout for information classification
- Implementing the classified information
What is critical asset? Firstly, the management needs to analyze the assets, which are critical. In a café shop, generally coffee machine, air conditioner, chair table and cup and cutlery items are very much critical. Suppose if there is only one coffee machine and it stops functioning than the café will face a huge loss, so the management needs to keep a back up of coffee machine or should have a alternative arrangement same goes for the air conditioner the management should be prepared with a alternative source of power and should have a stock of cup and cutlery.
Assets can be classified into following categories:
Every piece of information about your organization, customers, sales, staffs falls in this category. This information is critical for your business.
Therefore, a continuity plan should be developed to overcome any disaster and maintain the continuity of the business.
Two types of software, application software and system software are there, but this is a small café with 10 People sitting capacity, one is required to invest only on system software like operating system, software packages, tools and utilities.
There are various tangible assets in the café shop like
- Table and chair
- Air conditioner
- Coffee vending machine
- Cash machine
- Cup and cutlery items
- Motor vehicle
After the asset is acquired by the management, next step is to manage the physical assets and to monitor the condition and performance of physical assets. Policies and procedures are required to frame to monitor the condition of assets.
Regular reporting practice is very useful to ensure effective performance of an asset and an organization. Reporting about an asset can be through from customer, staffs feedback about performance of assets. The feedback and audit practices help management to identify the problem early and can take corrective action before the assets stop functioning.
Information collection about assets
Regular inspection of assets helps the management to identify the problem related with the assets. Regular checking of assets gives a clear understanding of the problem and one can take an appropriate action related to those assets. Depending upon the nature of problem and your company policy you may decide either to repair the assets to improve the performance or to replace with able assets.
In monitoring the condition of physical assets, one is required to evaluate need for, and access, special assistance.
- Identifying if the asset has the ability to meet the business objectives
- Cost of maintenance over a period of time
- Customer and staff feedback
- Efficiency of the assets
Specialist assistance includes:
- Electronics suppliers
- Information technology suppliers
Purchasing of physical assets has long-term implications. To help with the acquisition of assets you will need to prepare accurate equipment specifications so that you will not need to spend extra resources to fix the problem caused by wrong selection. It is more important when one is acquiring assets from a foreign country a wrong specification will involve lot of cost or the money will be blocked for a long period if you decided not to use the assets due to wrong specification, specification includes:
- Equipment efficiency
- Budget parameters
- Environmental policies for the business.
- Number and types of table, chair, carpet, coffee machine, cash machine, Air conditioner
It is very important to ensure that the asset, which you purchase, is financed properly. Before acquiring an asset, you need to choose the method the financial, which can give the best value for your money. Some of the financing methods available are:
A Finance lease Provides 100% of finance to acquire the asset for use in business. It is rental agreement between the lessor and the lessee where the lessor rent the assets for an agreed term and rental amount.
Assets can be acquired on Finance Lease for a restaurant café:
- Depreciable assets can be taken on finance lease.
- Finance lease amount is divided over years from two to five years
- Interest rates and repayments are fixed for the terms of contract.
Therefore, the management while taking the Premises café shop should follow the finance lease modeling.
- If we use the assets for revenue generation, rental payment will be tax deductible for us.
B.GST benefit can be taken for payment of rental and other charges.
Novated leasing provides a flexible and convenient way to acquire a motor vehicle as part of an employee salary package. Employees lease a motor vehicle of their choice and while they are in employment, their employer agrees to pay the rental amount and other costs associated with it directly from the employee gross salary. (Roche Finance, 2018)
- Interest rates and repayments are fixed for the terms of contract.
- Lease can be structured as operating lease and finance lease and may include option of vehicle maintenance and acquisition.
- The lease is portable as employees can take the vehicle with them whenever they change their employment.
- Tax advantage for employees
- Employees vehicle are off balance sheet item
- It is more cost effective as compared to other lease
- No cost and time will be involved to the management of the vehicle as the responsibility goes to the employees and not the employer.
Hire purchase is an agreement to purchase assets between two parties subject to payment terms. Ownership is automatically transferred when you make the final payment. One also has the option to purchase the equipment during the tenure of the agreement.
- In hire purchase irregular payment options are available
- Ownership comes into existence
- During the term of an agreement you can purchase the equipment any time
- Deposits not required
- Flexible repayment arrangements maximize cash flows
- Depreciation of an asset and interest component can be claimed as tax deduction.
In a Café Shop, one can acquire air condition, coffee machine, cash machine, carpets, cutlery items on hire purchase, as the ownership will also come into existence after the final payment is made over a certain period.
An operating lease is an agreement between you and the bank to rent equipment for use in the business for a fixed period .This lease has an advantage for those who are continually involved in upgrading their assets or if you do not want to own assets and take it on rent. No liability of residual value is left at the hands of lessee.
- You can easily have the latest technology without any risk.
- Interest and repayments are fixed for the term of contract
- It offers the flexibility to respond to new technology to the market.
- Rental payments are tax deductible if assets are used to generate income
- Income tax credit can be claimed for rental and other charges that are subject to GST.
In a café restaurant the management should opt for operating lease for such asset whose technology changes frequently in the market and the café has to adapt themselves according to change in the latest technology.
Hyman, I., 2015. The Importance of an Asset Register for your Business. [Online]
Available at: https://hymans.com.au/the-importance-of-an-asset-register-for-your-business/
[Accessed 5 June 2018].
Keythman, B., n.d. What Is a Restaurant's Long-Term Assets vs. Short-Term Assets?. [Online]
Available at: https://smallbusiness.chron.com/restaurants-longterm-assets-vs-shortterm-assets-69852.html
[Accessed 5 June 2018].
Newman, J., 2018. How to Develop a Strategic Asset Management Plan. [Online]
Available at: https://www.wikihow.com/Develop-a-Strategic-Asset-Management-Plan
[Accessed 5 June 2018].
Newspapers, I. E., n.d. Identifying and classifying assets. [Online]
Available at: https://www.networkmagazineindia.com/200212/security2.shtml
[Accessed 5 June 2018].
Roche Finance, 2018. Home/Car Finance/Salary Packaging Benefits. [Online]
Available at: https://www.rochefinance.com.au/car-finance/salary-packaging-benefits.html
[Accessed 9 June 2018].
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