Fixed Asset Audit: A Simple Guide for Small Business Owners

Introduction to Fixed Asset Management

If you run a small business, you probably wear many hats — from sales and customer service to managing finances. But one area that often slips under the radar is keeping track of your fixed assets — things like computers, furniture, vehicles, or equipment you’ve bought for the long haul.

You might wonder: Why does this matter?

Well, just like checking your inventory or balancing your books, a fixed asset audit is an essential part of keeping your business financially healthy. It helps you know what you own, catch any missing or broken items, and make sure your financial records are accurate.

Don’t worry — you don’t need to be an accountant to understand how it works. This guide will break it down into plain English and give you a simple, step-by-step approach to auditing your fixed assets — even if you’ve never done it before.

What are Fixed Assets?

Fixed assets are the long-term things your business owns (physical assets) — the tools, equipment, and property you use to run your business day after day.

We call them “fixed” because businesses don’t plan to sell them right away or use them up quickly like inventory or office supplies. Instead, they support operations over a longer period.

These assets usually last longer than a year and often lose value slowly over time, called depreciation. That means the item’s value is spread out across the years you use it.

Understanding your fixed assets is key to knowing what your business owns, planning for replacements, and keeping your financial records up to date.

What is a Fixed Asset Audit?

A fixed asset audit is the process of reviewing your business’s fixed assets — like equipment, vehicles, and office furniture — to confirm:

• ✅ You still have them
• ✅ They’re in working condition
• ✅ They’re being used for business
• ✅ Your records match reality
• ✅ You’re accounting for depreciation properly

Why are Fixed Asset Audits Important?

• Helps prevent loss, theft, or waste
• Keeps your financial records accurate
• Ensures you’re not paying tax or insurance on things you no longer own
• Gives a clearer picture of what your business is worth

It’s a good habit to do at least once a year, especially before tax time or when preparing financial reports. And don’t worry — it doesn’t need to be complicated. With a list, a few hours, and some attention to detail, even the smallest business can do a simple fixed asset audit.

Fixed Asset Audit Process

Auditing your fixed assets is essentially about taking stock of what your business owns, ensuring everything is where it should be, and keeping your records up to date to maintain accuracy. Whether you’re running a home-based business, a small shop, or a growing operation, this process will help you stay organised, avoid losses, and keep your financial reports in good shape. Here’s a step-by-step guide to fixed asset audit procedures:

1. Planning the Asset Audit

Before diving into the actual asset audit, it’s a smart move to take a little time to plan your asset management system. Planning helps ensure the process runs smoothly, especially if you have multiple locations, employees, or a long list of assets.

Start by deciding when you’ll do the audit. Many businesses schedule it at the end of the financial year or before tax season to ensure their records are up to date. Others do it after a significant business change, like moving offices, buying new equipment, or restructuring departments.

Next, think about who will be involved. If you have a team, you might assign someone from each department or location to help track down assets in their area. If you’re a solo business owner, you’ll be handling it all yourself, so block off time in your calendar to focus without distractions.

Then, gather your tools:

• Your fixed asset register (or a blank template if you’re starting fresh)
• A clipboard or tablet for taking notes
• A camera or phone to take photos of items, if needed
• Access to purchase records, receipts, and other documents
• Asset tags or labels, if you’re using a tagging system

Step 1: Start with a List of Your Assets

Begin by gathering a list of all your fixed assets. If you already have an asset register — great! That’s your starting point. If not, now’s the time to create one. A simple spreadsheet will do the trick; see our free fixed asset register.

At a minimum, include the name of each item, a brief description, purchase date, purchase cost, serial or ID number (if available), and the current location of the item. You might also want to note who uses it or which department it’s assigned to, especially if you have staff. This document will serve as your primary reference throughout the audit.

Step 2: Physically Verify Each Asset

Next, go through your list and do a physical walk-through of your business premises — whether it’s an office, warehouse, studio, or even your home office. The goal is to confirm that every item on your list still exists, is in the correct location, and is in usable condition.

Check off items you find and take note of anything that is missing, no longer in use, or broken beyond repair. If you come across items that aren’t on your list, add them and collect as much information as you can about them (when they were acquired, how much they cost, etc.). This step is essential for identifying ghost assets — things that are listed in your books but no longer exist.

Step 3: Check the Paperwork

Once you’ve physically verified your assets, it’s time to match them with supporting documents. Go through purchase receipts, invoices, maintenance logs, and warranty paperwork to confirm ownership and purchase dates. This part might feel a bit tedious, but it’s crucial, especially for tax, insurance, and compliance reasons.

Step 4: Update Your Records

Now that you’ve completed your physical checks and gathered your documents, go ahead and clean up your fixed asset register. Remove any items you’ve sold, lost, or thrown out. Update the locations of assets you’ve moved, and correct any information that’s no longer accurate. This is also a good time to note which assets are underperforming, due for maintenance, or nearing the end of their useful life. The more accurate your records, the better prepared you’ll be for taxes, budgeting, and business planning.

Step 5: Review Depreciation

Most fixed assets lose value over time, a process known as depreciation. There are different ways to calculate this, like the straight-line method or the reducing balance method. The method you choose depends on the type of asset. Calculating depreciation accurately is essential because it ensures you receive the correct tax deductions and that your financial statements accurately reflect the actual value of your business, as well as its accumulated depreciation.

Step 6: Create an Asset Audit Summary Report

Finally, compile your findings into a summary report. It doesn’t have to be overly formal, but it should clearly outline:

• What assets are currently in use
• What’s been disposed of or is missing
• Any new assets added during the year
• Any notes on condition, maintenance needs, or recommendations for replacement

Keep this report with your accounting records. It will be helpful not just for your planning, but also for discussions with your accountant, your insurance provider, or even potential investors if you’re seeking funding.

By following these steps, even the smallest business can confidently perform a fixed asset audit.

Asset Identification and Tracking

One of the most critical aspects of managing your fixed assets is ensuring that each one can be identified and tracked over time. It’s not just about knowing what you own — it’s about knowing where it is, what condition it’s in, and how it’s being used. That’s where asset identification and tracking come in.

What Is Asset Identification?

Asset identification means assigning each item a unique label or reference so that it can be distinguished from all others. It is beneficial if you have similar items, such as five laptops or multiple tools that look alike.

Identify each asset using:

• A description (e.g. “HP Laptop – Office Admin”)
• A serial number or model number
• A unique asset ID (you can make up your numbering system)
• An asset tag — a physical sticker with a barcode or number

Asset tags are a great, low-cost tool for small businesses. You can buy them online, or even print your own with a label maker. Stick them somewhere visible (but secure) on the asset, and link that number to your asset register.

Why Fixed Asset Tracking Matters

Fixed asset tracking is essential for knowing the location and condition of your company’s assets, ensuring efficient asset management. By maintaining accurate asset records, you can prevent loss or theft and improve accountability. This tracking aids in regulatory compliance and prepares you for audits by providing reliable evidence.

Tracking also allows you to monitor asset age and wear, enabling timely maintenance and informed decisions about asset utilisation and replacement. It supports accurate financial reporting, ensuring your financial statements reflect actual asset values, including depreciation.

How to Track Fixed Asset Inventory

For small businesses, you don’t need expensive software to track assets — a good spreadsheet will do. Your asset tracking sheet should include:

• Asset ID
• Description
• Location
• Assigned user (if applicable)
• Purchase date and cost
• Condition
• Serial number
• Depreciation info (if applicable)

You can even add columns for notes, such as maintenance history or expected replacement dates.

Suppose your business grows and you want something more automated. In that case, you can explore affordable asset management software that lets you scan tags with your phone, track assets by location, and generate reports in seconds.

To help businesses manage their fixed assets efficiently, we have created a free fixed asset register template. This template provides a structured format for documenting and tracking your assets, making it easier to keep records up to date.

Fixed Asset Tags: What They Are and Why They Matter

Fixed asset tags are simple labels that you attach to the equipment, tools, or other long-term items your business owns. These tags help you keep track of your assets by giving each one a unique identity.

Each tag typically includes a unique number or code, and sometimes a barcode or QR code. These codes match the asset’s entry in your tracking spreadsheet or software.

Using asset tags makes your life a lot easier when it comes to fixed asset audits, insurance claims, maintenance, or just staying organised.

Asset Tracking Software

Implementing asset tracking software provides real-time data on asset location, condition, and usage, facilitating informed decision-making and ensuring that asset records are up to date. By integrating barcode technology with asset management software, businesses can automate the tracking process, minimising manual data entry and human error.

Popular asset tracking software includes options like Asset Panda or using the feature within Xero. Xero allows you to enter the asset details and run depreciation, keeping all the finances in one place.

Common Mistakes to Avoid with Fixed Asset Records

Fixed asset management doesn’t have to be difficult, but there are a few common mistakes that can trip up even the most organised small businesses. Knowing what to watch out for can save you time, money, and a lot of future headaches. Here are some key pitfalls to avoid:

1. Not Keeping an Up-to-Date Asset Register

One of the biggest mistakes is not keeping the register up to date. If you forget to update your register when you buy, sell, or dispose of assets, your records will become inaccurate quickly.

2. Skipping Physical Checks

It’s tempting to rely solely on what’s in your spreadsheet, but skipping the physical walk-through can cause you to overlook missing, broken, or unused items. A fixed asset audit should always involve seeing the assets in person.

3. Not Tagging Assets

If your assets don’t have labels or ID numbers, it can be hard to tell similar items apart or know which item matches which entry in your register. It is especially true for laptops, tools, or other equipment that look the same.

4. Overlooking Small but Important Physical Assets

Sometimes businesses focus only on the big-ticket items and forget to track things like tablets, small machines, or tools. However, those smaller assets still hold significant value, and replacing them can add up quickly, impacting your overall asset valuation.

5. Ignoring Depreciation

If you’re not recording depreciation, your financial statements might overstate asset values. It can affect your books, tax deductions, and mislead anyone reviewing your finances, such as lenders or investors. Accurate depreciation records ensure that your financial statements reflect the actual value of your assets, providing a clear picture of your company’s financial health.

6. Failing to Document Disposals

Throwing away or selling an asset without updating your register is a recipe for confusion later on. You might end up tracking things you no longer own, which can lead to overvaluation or issues during tax time.

Avoiding these common mistakes will help you build a reliable and efficient system for managing your fixed assets and maintain accurate records.

Fixed Asset Audit Conclusion

In conclusion, conducting a fixed asset audit is crucial for maintaining accurate financial records and ensuring the efficient management of your business’s resources.

By regularly auditing your fixed assets, you can prevent losses, spot ghost assets, stay compliant with regulatory requirements, and make informed decisions about asset management. Remember, a thorough asset audit not only protects your company’s assets but also enhances your financial integrity and operational efficiency.