Why fixed asset and capital expenditure schedules matter in SaaS

Managing fixed assets and planning for capital expenditures are important for any business. A well-structured fixed asset schedule serves as the foundation of asset management as it keeps a comprehensive record of all assets, detailing their acquisition costs, depreciation, and current value. This helps finance teams maintain accurate financial records and comply with tax regulations.

Combined with a capital expenditure (CapEx) schedule, a fixed asset schedule also helps business leaders make informed financial decisions. 

This article explores the significance of fixed asset and CapEx schedules, and provides tips to make creating them easier. But first, let’s develop a shared understanding of what fixed assets are and why tracking them matters for your business.

What are fixed assets?

Fixed assets are long-term pieces of property or equipment that a company owns and uses to generate revenue over multiple accounting periods. Also known as capital assets or tangible assets, fixed assets are expected to provide benefits for more than one year and aren't intended for resale in the normal course of business.

However, considering the diversity of accounting standards and regulations, different countries and accounting standards use various terms for fixed assets. Under the US generally accepted accounting practices (GAAP), fixed assets fall under Accounting Standards Codification (ASC) Topic 360: Property, Plant, and Equipment. When a company makes a capital expenditure to acquire these assets, they're recorded in the line item for property, plant, and equipment (PP&E) on the balance sheet rather than as an immediate expense.

The accounting treatment of fixed assets spans across three main financial statements. Let’s understand this with the help of a hypothetical scenario where a company purchases a small office building for $200,000. 

How fixed assets appear on the balance sheet

‍Fixed assets are capitalized and appear as non-current assets under PP&E. Their value gradually decreases through depreciation over their useful life.

‍On the balance sheet, the cost for purchasing our office space is recorded as a $200,000 asset. Its value, as reflected on future balance sheets, will decrease over time. 

How fixed assets appear on the income statement (P&L)

The income statement shows the depreciation of the asset. For the purposes of depreciation, the original cost of a fixed asset is spread across the usable life of the asset, which is defined in years. Depreciation of fixed assets often spans multiple years, appearing on each annual income statement as a depreciation expense.

‍The income statement for our office building will show an annual depreciation expense of approximately $5,128.21. This value is calculated based on the standard useful life for depreciating commercial buildings of 39 years per GAAP and ASC 360, and using the straight-line method, which spreads the cost of the asset into equal amounts. 

How fixed assets appear on the cash flow statement

‍While the purchase of fixed assets are considered CapEx, how their costs are recorded on the cash flow statement depends on how they were acquired. GAAP requires cash flow statements to show inflows and outflows based on whether they are part of a company’s operating activities, investment activities, or financing activities. 

Because most capital expenditures involve acquiring long-term assets, the associated costs are usually recorded as investing activities on the cash flow statement. However, if financing was used to acquire the asset, some of that cost would be recorded under financing activities. 

Let’s say we purchased our office building outright, the entire $200,000 would appear on the cash flow statement under Investment Activities with a description like, “Purchase of PP&E.”  On the other hand, if we put $50,000 down and financed the remaining $150,000, we would record the down payment under Investing Activities as “Purchase of PP&E” and the loan proceeds (i.e. the amount financed) would appear as an inflow under Financing Activities, with a description like “Proceeds from Loan”. ‍

What are fixed asset and CapEx schedules?

While fixed asset and CapEx schedules each serve different purposes, most SaaS businesses combine them into a single schedule to plan future capital investments, track existing fixed assets, and monitor depreciation. This is primarily due to the nature of the SaaS business model.

Unlike traditional, physical product-based businesses, SaaS companies typically don’t have many fixed assets. Their primary assets are their intellectual property and software products which are intangible.

Combining these schedules into one is also made possible by the fact that they are intrinsically related as both relate to a company's long-term assets. To understand this relationship, let’s dig in a little deeper into the different purposes for these schedules and what each one contains.  

Fixed asset schedule

A fixed asset schedule is a complete listing and detailed records for every fixed asset in the business, including:

• A detailed description of each asset
• The cost to acquire each asset
• Depreciation details (method, accumulated depreciation, net book value)
• Any adjustments to the value or disposal of the asset if applicable 
• Useful life and remaining life of each asset

The fixed assets schedule provides a snapshot of the value of fixed assets on the balance sheet, tracks depreciation expenses for the income statement, and is the source document for the fixed asset account balance that appears in the general ledger. 

CapEx schedule

A CapEx schedule tracks all the capital expenditures (investments in fixed assets) during a specific period and includes the following:

• List of capital investments made during the reporting period
• Costs associated with each investment.
• Categorization of CapEx (e.g., growth CapEx vs. maintenance CapEx).
• Funding sources for the expenditures (cash, loans, etc.).

The CapEx schedule provides insight into how much is being spent on long-term assets during a specific time frame, which is important for both financial modeling and cash flow analysis.  

It also includes a forward-looking, planning component in the form of a CapEx budget. This budget forecasts future capital expenditures that will be necessary for acquiring new assets, upgrading existing ones, or maintaining current infrastructure. It also details projected costs for each planned investment, establishes timelines for making them, and identifies the intended funding sources for each expenditure. 

Whenever a new asset identified on the CapEx schedule is acquired, it becomes part of the fixed asset schedule, where its depreciation can be tracked over its useful life. Thus, the CapEx schedule feeds into the fixed asset schedule.

Importance of fixed assets and CapEx schedules in financial reporting

A fixed assets schedule provides a structured way for documenting asset information important for financial reporting, tax compliance, and asset management. It provides detailed documentation of dates, amounts, service dates, and useful lives for various capital expenditures, including buildings, major improvements, and repair projects. This level of detail helps SaaS companies with the below:

• Asset management: With a fixed asset schedule, leaders can assess each asset’s performance, its remaining useful life and estimate its replacement costs. 

• Tax purposes: This helps companies accurately calculate depreciation correctly, provide clear proof for tax returns, and claim tax deductions. 

• Consistency in reporting: A fixed asset schedule keeps a centralized record of each asset's depreciation method, useful life, and accumulated depreciation. This ensures consistency in financial reporting across multiple periods.  

• Depreciation management: Having all asset information in one place makes depreciation calculations simpler. It also helps finance teams track how assets lose value over time and ensure their financial reports follow the required rules and regulations.

A fixed asset schedule, which offers complete visibility into each asset’s usable life span, helps leaders develop a more informed CapEx plan, which in turn supports budgeting, forecasting, and analysis. 

For example a CapEx schedule is very useful for cash flow forecasting because it shows exactly when major cash outflows will occur. This gives leaders clear visibility into the timing and magnitude of capital investments, allowing them to better plan for cash outflows and funding needs. 

Tips for creating your fixed assets and CapEx schedules 

Together, well-maintained fixed asset and CapEx schedules support compliance and lead to better, more informed decisions regarding what are often significant investments in your business. Here are some tips to make creating and maintaining them easier: 

1. Automate data consolidation and reconciliation

Maintaining accuracy in creating a CapEx schedule becomes challenging when teams use spreadsheets to keep records. Purchase costs might be recorded incorrectly or depreciation calculations might have errors. Using financial consolidation and reporting software can automate the data collection process and create a single source of truth to verify assets and calculate and track their depreciation.  

2. Set a capitalization limit

A capitalization limit determines whether a purchase should be treated as a fixed asset or as a regular expense. Setting this limit makes it easier to track, verify, and maintain your CapEx schedule while avoiding clutter from minor purchases. While accounting standards don't specify exact limits, work with your auditors to set thresholds that make sense for your business size and industry.

3. Record the sale or disposal of assets promptly

Whenever an asset is sold or disposed of, remove it from active tracking on your fixed assets schedule to maintain a clean, current schedule that focuses only on existing assets.  This will make monthly reconciliations and reporting more efficient and prevent errors in reporting existing assets.

4. Use multiple asset categories

Breaking down broad asset categories into specific subcategories improves tracking and reconciliation. For instance, break down 'Office Equipment' into detailed categories like 'Computers' (laptops, desktops, servers) and 'Office Machinery' (printers, phones, conference equipment). This sub-categorization makes tracking and reconciliation more simple and more efficient. 

Leverage technology to streamline all your financial reporting

Managing fixed asset and CapEx schedules manually can create challenges that can impact the accuracy of your financial reporting.  

Modern financial reporting tools like Drivetrain can significantly streamline your schedule creation and maintenance. 

With 200+ integrations, Drivetrain can automatically consolidate your asset data from multiple sources directly to eliminate the potential for error, not to mention the effort of doing it manually. 

With asset information automatically flowing into Drivetrain, tracking it over time becomes much easier. For example, you can create formulas to calculate depreciation expenses and when new assets are added, your fixed asset schedule is updated automatically.  

Beyond basic tracking, Drivetrain's dynamic dashboards provide real-time insights into asset performance, utilization, and maintenance needs. It also allows different teams to collaborate and work together on asset management. 

With Drivetrain, leaders can monitor key performance indicators, track asset maintenance, and make strategic decisions with confidence. 

‍Explore Drivetrain today!