Asset Management — Critical Component of Business Management

Most manufacturing companies have recently learned that fixed asset management should be a key area of the success of the business enterprise enterprise. It is now realised that fixed asset management results in economy of production and operation. Therefore can to boost in profits of 10 to 15 per cent, which cannot be ignored because it makes a significant contribution to the bottom type of the business.

There is no doubt that inventory and production management deserves the key focus of the management for effective functioning in scbam a manufacturing enterprise. If asset management was neglected, then fixed assets were not being effectively and efficiently managed. But in recent years it’s been realised efficient management of fixed assets like plant and machinery and other movable and immovable fixed assets can cause economies of scale. Thus proper monitoring and regular maintenance of productive fixed assets will give a longer productive life. The net effectation of this really is more profits for the business.

Naturally in fixed asset management, the assets accountable for production, research and development etc., which have direct bearing on the productivity of the business enterprise, must be managed more closely. There has to be constant monitoring on the maintenance aspect to prolong the useful life of the asset. A movable asset such as a vehicle needs proper maintenance. Otherwise without regular running and maintenance the car can soon become corroded and useless.

Every category of assets needs a different focus of management. Fixed assets need regular maintenance to make sure normal life of the assets with regards to the wear and tear on the asset. Adequate planning is also essential for building up financial reserves over the life of the asset for replacing the fixed asset at the conclusion of its useful life. Thus the brand new plant and machinery could be ordered well in time and energy to replace the old one.

Management also needs to weigh the benefit of replacing the plant and machinery and other production assets or continuing to maintain the current production assets. In addition they must consider from time to time perhaps the asset has become obsolete owing to new technological advances. In recent years, technology has advanced at a rapid pace and management needs to be vigilant on this matter to prevent being left behind by competitors. Asset management also includes adequate insurance to cover any extraordinary losses due to fire and natural disasters.

A kind of awakening has brought place in major industries during the past decade on the role of asset management. It has become attractive due to decreasing margins and competition growing day by day. To prevent major capital spending, companies are actually developing strategies to obtain optimum performance from available fixed assets thereby getting increased returns. This involves proper schedule of maintenance to minimise breakdowns and consequent loss of production.

To be able to have reliability in scheduling, regular planning together with various departments, at the very least on a monthly basis is completely necessary. Standards must be set as well comparative analysis within industry standards must be evaluated to find out whether the organization is achieving optimum production consistent with the industry. If not, then suitable targets and best practices must be create within a reasonable time frame to achieve those targets.

Logistical performance should also be evaluated to consider whether transportation costs are economical and features of location are met. The management tools for evaluation could be in kind of comparison studies, which could create in kind of graphs and bar charts for quick visual comparison. If fixed asset performance is seen to be below par, then priorities could be fixed for the concentrate on improvement.

Asset management tracking is critical in large manufacturing plant and utilities. Integration of asset management with raw material and maintenance procurement systems along with financial systems and their cost versus savings benefits must be monitored on a day-by-day basis. Senior financial officers must therefore be engaged in asset management.

Based on nature of assets in different businesses. As an example, utility companies, mineral companies, oil and natural gas are receiving large properties as part of their assets. These have to be effectively managed and timely decisions have to be taken whether to get or sell properties for the fitness of the business. Depending on their values and necessity to the running of the organization, the assets could be categorized for better management.

To help company management, you will find a number of established consultant companies having qualified manpower whose help will undoubtedly be very theraputic for asset management. They can be extremely effective to audit present practices and suggest best practices, problem solving and action plans. It might be really worth the cost to hire established consultants to enhance performance.

Asset management data could be computerised to enable management to chalk out strategies on a general basis. Integration of asset management systems with other financial systems will give better picture of whole operation of the enterprise. This may enable various key officials to give their timely input to top management to be able to devise suitable plans. As an example, government may emerge with special tax incentives for certain industries to purchase fixed assets. In a scenario where management is monitoring and managing fixed assets, the Finance Manager may quickly recommend purchase of new fixed assets to make the most of the government’s tax incentive for that business.

Lastly, it’s the assets of a company which enable the production and delivery of its goods and services. So when fixed assets are now being purchased or replaced several important questions arise. What is the price and cost benefit for the business. What funds are available? If the asset be purchased new or secondhand or should it be leased and how can it benefit the business enterprise? Questions concerning the usage of the asset could be. What are the operating costs? Just how much skilled and unskilled manpower will be needed for operation? What are the training costs involved? What are the installation costs? What is the useful life of the asset? Is it the newest technology? These and a lot more questions must be asked and answered. This may ultimately factor into the long-term strategy of the business.

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