Non-current assets are things your business owns that you’re not going to turn to cash within a year. Examples include property and goodwill.
An asset is a valuable that your business owns. Assets can be divided into many categories, such as current assets, liquid assets, fixed assets, intangible assets, and operating assets.
Non-current assets describe any assets that doesn’t fall into the current or liquid category, meaning that it takes more than a year to convert to cash.
Examples of non-current assets
Non-current assets serve long-term needs. Examples include fixed assets like property, machinery, and cars. If you use these items to operate your business—for example you own a building that you use as a shop to sell your goods—it’s also considered an operating asset.
Non-current assets also include intangible assets such as a good reputation or satisfied customers. These assets are hard to put a value on, but they can greatly contribute to your bottom line.
Why asset management is important
It can be a bit difficult to organise assets into all these different categories, but one the most important things to keep in mind is that you need to have enough liquid and current assets to cover your bills, pay fixed costs, and to handle unforeseen expenses. This is called having good liquidity.
It’s not a good sign if you have a lot of non-current assets, and barely any liquid or current ones. That’s because this means that you’ve tied up a lot of your money in buildings, machinery, and in your intellectual property.
These things can’t easily be sold off if you need money to pay your suppliers, for example.
To make sure you have good liquidity, you should set up a cash flow budget to monitor the money going out of your business and coming into your business. This will help you ensure that you have the necessary funds—liquid assets—to run a successful business.