Are Your Computers an Asset or an Expense?

Not too many businesses today can get away without having computers.

However, the success of some businesses can be based on how they view their investment in them. Do they treat them as an asset and take care of them or as an expense and drive them into the ground?

I'm not referring to the accounting treatment of the purchase in this case. Rather, this is about the intangibles that relate to the computers.

THE ASSET APPROACH

Successful businesses recognize the tremendous amount of productivity computers can bring to their staff. Because of that, they invest in optimizing the value of the asset and:

• Have a well thought out computer replacement plan - are the computers cycled out and replaced every 3 years? 4 years? Replacement costs are planned for in advance, not after the computer had croaked.
• Arrange for proper care and maintenance - they are proactive in making sure their security software is up-to-date and routine maintenance and clean-up is done
• Realize that employees can't be productive if they are always waiting on a slow computer or slow internet connection
• Have a solid data backup plan in place that is tested on a regular basis

THE EXPENSE APPROACH

Businesses that take this approach view their computers as more of a "pain in the butt" and...

• Drive their computers into the ground - "it still works, doesn't it?". Too bad it takes 15 minutes for it to boot up, preventing an employee from getting to work each day. Think about how fast 15 minutes of lost time every days adds up over the course of a year. Not to mention that the computer will likely crash at the worst possible time.
• Consider proactive maintenance a waste of money - until they get zapped by a virus which shuts down their computer network for a day or two. How much did that outage really cost them?
• Usually pay little or no attention to their data backup - until their hard drive gets toasted and they realize they just lost all of their critical accounting data.

Which approach do you take in your business?

There are a tremendous amount of hidden costs in the expense approach. These costs may not show up directly in a profit and loss report, but they are out there.

Is it time to rethink your approach?

Share your thoughts and post a comment below...

_________________________________________________________________________________________________

Scott Gregory provides CFO and controller services to service, manufacturing and distribution businesses in Northeastern Ohio.

He is very fluent in the following dialects often heard yet rarely understood by business owners:

• "Accounting-speak"
• "IT jargon"
• "Inventory gobbledygook"
• "Banking banter"
• "Internet and e-commerce cyberbabble"

Put his twenty-five years of experience to work in your business. Contact Scott today.

Comments

[Best Way to Advertise Online]

I've just bought a new laptop and decide ill not change my laptop til next year :)

[Benn]

My computer burns a hole in my pocket. Im forever upgrading. But I cant live without it.

[storage]

Any increase in productivity can be considered as an asset. Since computers improve productivity they are a asset for any business.

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Computers are an asset to any company because it increases the productivity of it's employees. You just have to remember to have a solid data backup just in case your computer crashes.

[ANNETTERiley]

All people deserve good life and mortgage loans or small business loan would make it better. Because freedom depends on money.

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My computer is more of an expense as with Windows I am having more issues than ever - its time for an upgrade
Good post

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Thanks for sharing this idea. I know it's not been new to me but i am glad you also shared this. Good job! and Keep it up!

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Um...like the style of your writing.*_*

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[IT consulting]

it's part of your overhead, yes but it is also a depreciating asset. the A = L + E shows the need for it to effect as both in the accounting equation