How to Convert Assets into Cash – Know the Facts
As a business strategy, it is important to know when and how to convert assets into cash. While liquidating assets is an essential part of bankruptcy procedures, companies also use liquidation as a means to free up cash, even in the absence of financial hardship. Generally the primary reasons to liquidate are to get rid of surplus or idle assets, to obtain additional working capital, or to pay off creditors.
Before you begin the process, consult with your attorney and accountant or a professional tax advisor to help you through the process. Moreover, if you intend to liquidate assets to satisfy creditors, you may need to obtain their consent to do so.
Convert Assets into Cash – Optimize Your Results
There is a process to convert assets into cash in order to get optimal results. First you need to do a thorough inventory and evaluation of all the assets, whether real estate, machinery or equipment, you wish to liquidate. Compile detailed information regarding the original purchase price, age, and condition of the asset, along with quality photos. Do not forget to include records on warranties as well as repair and maintenance history.
Next, consider how you want to market your assets to best achieve the liquidity you need. Liquidation sales and auction sales are two of the most commonly used ways to recover assets. A liquidation sale is a process of selling assets in an orderly manner over a period of time, with the goal of realizing higher values that are closer to fair market price.
Auctions have the advantage of taking place very quickly from start to finish but may not draw as high of prices as a liquidation sale. This is where marketing can improve the outcome because competition among bidders is what determines the item’s selling price, and more competition can drive a price up.
Strategies to Convert Assets into Cash to Realize Maximum Value Include:
- Carefully evaluate your asset disposition plan by factoring in possible outcomes, along with all of the costs involved. Look at the potential costs of not doing it (both legal and otherwise).
- Consider listing your equipment with a liquidity specialist that has the resources and expertise to address your asset disposition needs. This not only minimizes the organizational disruption, it also takes advantage of the expertise of a third party who has the experience to help maximize returns.
- Find buyers by reaching out to your industry contacts, including any equipment dealers, competitors, and suppliers
- For equipment that is old, worn out or damaged, consider selling it for scrap value, or donating it to charity (if possible) for a tax deduction.