Why Do You Think Your People Are Assets?

Most businesses say their most valuable asset is their people, but we accountants don’t think so. In Financial Statements people are usually costs and liabilities.

Wages and salaries are costs. Before they take it, employee leave owing is a liability. People are only assets in Financial Statements when they’re building an asset (e.g. configuring a computer system, when their wages are included in the cost of the system) or are creating products to sell to customers (when their wages are part of the business’s work-in-progress or inventory).

Even enhancing employees’ skills by training is a cost which may be why businesses often under-invest in improving the capabilities of their people. (If the business says, ‘What happens if we train them and they leave?’, retort, ‘What happens if we don’t train them and they stay?’).

But, really, a business’s people ARE its most important asset. Their expertise, skills, knowledge and, collectively, the business’s culture are often fundamentally the only asset a business has. There’s a mis-match between reality and Financial Statements and not only when it comes to people.

It’s vital that you know how to read Financial Statements to make the best decisions – which is why the Financial Statements in Plain English are so important!

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