What you need to know about client list
I have a few clients who buy either client lists or book of business or even a business. Their question is if these are expenses.
Logically, when people pay for stuff, they assume it is an expense.
Money left my pocket.
In accounting, these are treated differently. The main question is, did we consume this in one year?
The answer would be no.
For example, if I buy a client list, it will benefit me and provides me with income for a few years so I can expense the portion that did not yield any income. That would be for clients that I paid for but didn’t come to me.
Same thing for a goodwill, in the past we use to depreciate 75% of the value. Now we can assess the goodwill and see if it lost value then we can write it off.
Here are some general questions about these intangible assets. Meaning, we can’t even see them.
How do you value a client list?
Some sellers can say my clients, let’s say 100 provide $100,000 income per year. On average $1000 per client.
So, if one did not buy stuff from us, we can consider the client gone and reduce the value by $1000
- Figure Out the Likelihood that client stays with you.
- Calculate each Client Costs from step 1
- Calculate Monthly Income. From step 1
What is customer list accounting?
A customer list or List is a set of information about certain clients.
For example, lawyers list in Ottawa, Accountant lists in Ottawa.
This list includes:
What type of asset is a customer list?
Client list or customer list are classified as Intangible asset. Assets are located in Balance Sheet.
Can customer lists be capitalized?
Yes, customer list or client list are capitalized and can also be depreciated.
What are the five major types of intangible assets?
These are assets such as:
- Intellectual property, patents, copyrights, trademarks, trade names,
- Brand equity
- Client list
Is a customer list an asset?
Yes, customer lists are classified as assets. These are also classified as long-term assets.
What are examples of intangibles?
These are assets such as intellectual property, patents, copyrights, trademarks, trade names, and goodwill.
What are the 5 Major intangible assets?
Intellectual property, patents, copyrights, trademarks, trade names,
- Brand equity
- Client list
How do you classify intangible assets on a balance sheet?
They are listed as assets on the balance sheet and formal name for them are Intangible assets.
What are the two main characteristics of intangible assets?
Intangible assets have two main characteristics:
- They do not have physical existence or shape.
- They are not financial instruments. In most cases, they provide services over a period of years and normally classified as long-term assets. Identify the costs to include in the initial valuation of intangible asset.
Contact us for more information