Most people regard the development of a website as being a cost to the business. In accounting terms, this means it is written off in one hit on your profit and loss, typically in the year you get the website developed. There is another option available to you, however – treating your website as a fixed asset.
When you do this, the website moves from your profit and loss to your balance sheet, removing the one-off hit of the cost of development.
Before going further, we are not accountants at Business Website Group. This means you should always take professional advice when making any decisions relating to the accounts of your business.
In the view of many experts, though, a website can be regarded as a fixed business asset.
A fixed asset is something in your business that you purchase to help you generate income. Office equipment, a vehicle, or a machine are all common examples.
Fixed assets typically have a useable life after which they fail or become obsolete and need to be replaced.
In accounting terms, you don’t record the cost of purchasing a fixed asset in your profit and loss statement. Instead, you put it on your balance sheet. Then, over the usable life of the asset, you record its depreciation, effectively spreading the cost of purchasing the asset over several years rather than one.
So, can you treat your website as a fixed asset? In most cases, you probably can. The only real exception to this would be a website that is purely a brochure site that contains information about the business and what you do, but contains no calls to action, lead generation tools, or ecommerce functionality.
In reality, however, websites like this are becoming increasingly rare as digital marketing in all industries becomes increasingly important.
So, if you expect your website to help you directly generate income over the coming years, you can regard it as a fixed asset and put the cost of development on your balance sheet.
In other words, if you expect your business to financially benefit from the website over several years, you can spread the cost of developing that website over that same period of time.
Treating your website as a fixed asset strengthens the balance sheet of your business. It also means you don’t have to write off the cost of building the website against one year’s profit.
Of course, this may not be something everyone wants to do. There will some situations, for example, where it makes more sense to include the cost of building the website in your profit and loss. Only you and your accountant can make that decision depending on your circumstances.
The important thing to remember, however, is you have options based on the value of the website to your business over the long-term.
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