How do I plan an asset purchase or sale?

With Fowardly, you easily plan and project a number of different scenarios, including how an asset purchase or sale can affect your cash flow.

Steps to Plan an Asset Purchase

1. On the Cash Flow page, click on Plan a Scenario. 
2. Click on Plan an Asset Purchase/Sale. 
3. Fill out the asset purchase details:
   • Name. Select the name of the third party, business, or institution that wants to buy the asset. You may either:
     • Pick from an existing contact or vendor; or
     • Enter a new name.
   • Payment Mode. The payment method may fall into either of the two following options:
     • Installment. The payment will be laid out across multiple installments.
     • Full Payment. The payment will be done in one lump sum.
   • Asset Cost. You may either use the slider to specify this asset's cost or enter it directly by clicking on the displayed asset cost section. 
   • Chart of Account. This should be the Chart of Account that the asset purchase would fall under. 
   • Number of Installments. You may either use the slider to specify the number of installments for this asset's payment or enter it directly by clicking on the displayed number of installments value section. 
   • Annual Percentage Rate. You may either use the slider for this or enter this value via the keyboard by clicking on the displayed rate to the far right of this field.
     • Also select the rate type, which could be either of the following two values:
       • Flat
       • Reducing
   • Installment Start Date. The date when the first installment for the purchase is expected to be paid. Use the date picker control to select the start date for this payment.
   • Installment Frequency. This specifies whether the installments are paid:
   • • Daily
     • Weekly
     • Bi Weekly
     • Monthly
     • Semi Monthly
   • Freight & Instl. Cost. This is based on any projected freight and installation costs. You can insert this by entering the:
     • Value. The number you enter will be taken as a flat monetary value.
     • Percentage. The number you enter will be taken as the percentage value of the total project revenue.
   • Chart of Account. This should be the Chart of Account that the freight & installation cost would fall under. 

Example: Plan an Asset Purchase

Now, let's walk through a practical example where a company is deciding whether or not to purchase an asset. Let's assume we are in the hospitality business and are in need of new industrial hot water tanks. The asset price is $50,000 on the open wholesale market, and we've found a seller that will finance the water tank for us over the next three years at 12%. 

• • Contact Name: Hot Water Tanks For U
  • Payment Mode: Installment
  • Chart of Account: Furniture & Fixtures
  • No. of Installments: 36
  • Annual % Rate: Reducing 12% (Interest + Principal)
  • Installment State Date: 02/01/2023
  • Installment Frequency: Monthly
  • Freight & Instl. Cost.: $1,500
  • Chart of Account: Postage & Courier

You now have the ability to assess how a total cost of $51,804.60 spread out over 36 months will impact your cash flow projection.

Steps to Plan an Asset Rental

1. On the Cash Flow page, click on Plan a Scenario. 
2. Click on Plan an Asset Purchase/Sale. 
3. Fill out the asset rental details:
   
   • Name. Select the name of the third party, business, or institution that wants to rent this asset to. You may either:
     • Pick from an existing contact or vendor; or
     • Enter a new name.
   • Rent Amount. You may either use the slider to specify the rent amount or enter it directly by clicking on the displayed rent section.
   • Chart of Account. This should be the Chart of Account that the rent amount would fall under. 
   • Freight & Instl. Cost. This is based on any projected freight and installation costs. You can insert this by entering the following:
     • Value. The number you enter will be taken as a flat monetary value.
     • Percentage. The number you enter will be taken as the percentage value of the total project revenue
   • Chart of Account. This should be the Chart of Account that the freight & installation cost would fall under.
   • Repeat Every <value>. Enter a numeric value for the repetition frequency. In the same field, select the frequency period from any of the following values from the dropdown control. When you select the frequency period as Weekly or Bi Weekly, the system pops up another control that lets you select the specific day/s of the week when the repetition will occur.
     
     • Daily
     • Weekly
     • Bi Weekly
     • Monthly
     • Semi Monthly
   • End Date. Enter the end date of the rental agreement if it is not a continuous lease, else retain the default value of None. Possible values for this field are: 
     • None (open-ended -- nothing to select)
     • After<numeric value> (number of occurrences)
     • By (select date from date picker)

Example: Plan an Asset Rental

In this example, the company is deciding whether or not to rent an asset. Suppose again we are in the hospitality business and are in need of new industrial hot water tanks. Instead of buying it for $50,000, we are exploring the option of renting it as the lifespan of the product is usually less than 5 years. We can rent it for $1,800 a month for 36 months.

• • Contact Name: Hot Water Tanks 4 U
  • Rent Amount: $1,800
  • Chart of Account: Equipment Rental
  • Freight & Instl. Cost.: $1,500
  • Chart of Account: Postage & Courier
  • Repeat Every: 1 Monthly
  • End Date: After 36 Occurrences 

You now have the ability to assess how renting it over 36 months would affect your cash flow projection.

Steps to Plan an Asset Sale

1. On the Cash Flow page, click on Plan a Scenario. 
2. Click on Plan an Asset Purchase/Sale. 
3. Fill out the asset sale details:
   
   • Contact. Select the name of the third party, business, or institution that wants to buy this asset. You may either:
     • Pick from an existing contact or vendor; or
     • Enter a new name.
   • Asset Amount. You may either use the slider to specify this asset's sale amount or enter it directly by clicking on the displayed asset section. 
   • Chart of Account. This should be the Chart of Account that the asset sale would fall under.

Example: Plan an Asset Sale

Now, let's assume a company has fully moved into a remote setting and does not have a need for its office anymore. To free up additional capital for alternative investments, the company is deciding whether or not to sell its office space. They've connected with their commercial real estate agent, who has told the company they can confidently sell the space for $1.2 million on the open market.

• • Contact Name: George's Accounting Firm Ltd.
  • Asset Amount: $1,200,000
  • Chart of Account: Buildings

You now have the ability to assess how a $1.2 million capital injection would impact the company's finances.