What are idle assets and what are yours worth? We discuss this in more detail as well as the pros of financial evaluations.
How Much Are Your Idle Assets Worth?
Idle assets are assets that are currently not being of use or bringing in any income. Having a financial evaluation done on all your assets will help you identify where idle assets are being wasted. The definition of “idle asset” according to the financial dictionary is:
“Describing a project or asset that is not being used and therefore is not generating revenue. An idle asset usually has a maintenance cost associated with it. Companies therefore attempt not to have idle assets unless demand drops below a certain level.”
Examples of idle assets that might have been purchased for your business include:
- Land that was bought to build on as an extension of the business, but is currently sitting empty
- Having additional laptops in storage for new employees that might join the team in the future
- Paying monthly for parking bays that aren’t being utilised
Storing cash in a safe where it cannot earn interest or be spent
- Machinery or equipment that is in need of repair but is currently sitting idle
- Surplus of machinery where only some of it is being used due to lack of demand
- Company vehicles that are sitting in the garage due to lack of demand
Assets all have the capability to earn a return on investment. If you cannot put these assets to work and bring in some revenue, then perhaps it is time to sell them? Often people and businesses hold onto idle assets for fear of needing them in the future. Where plans to expand the business may have been in the works and perhaps have taken longer than expected.
Pros Of Financial Evaluations
This is where financial evaluations come into play. Knowing what your idle assets are worth, or what they could potentially bring in, could make you change your mind about their validity. If we look at the examples above, a financial evaluation on each of them could completely change the outlook.
- Land could be rented, sold, or perhaps converted into the business extension that it was initially envisioned as. Knowing what the value of the land is might make it easier to sell instead of building on. If the cost of the extension will be covered by the capability of what will then be offered, then it could be worth it. Otherwise… sell it and put the money back into your business
- Additional laptops that are sitting idle could be sold and new ones bought when required. Computers depreciate and become outdated really quickly
- Parking bays could be rented out or relinquished until additional bays are needed. Renting out unused bays is a less permanent option that will free them up again when you need them
- Cash can and should be deposited in order to earn interest
- Financial evaluations on machinery will determine if it is still going to help turn a profit. If it is then it should be repaired and put to work
- Any surplus machinery should either be put to work or sold
- The same can be said for company vehicles as they are a depreciating liability
Eliminating idle assets can free up business resources, budget, storage space and even money. If you are paying to store an idle asset then it is not only not bringing in revenue, but it’s also costing you money. Perhaps it’s time for that financial evaluation to determine whether or not your idle assets are worth holding onto or not.
Contact us today to set up a financial evaluation today.