Asset Management — Key element Component to Business Management

Most manufacturing companies have recently unearthed that fixed asset management should be a key part of the success of the company enterprise. It is now realised that fixed asset management contributes to economy of production and operation. This in turn can to improve in profits of 10 to 15 per cent, which cannot be ignored as it makes a significant contribution to the bottom distinct the business.

There is without doubt that inventory and production management deserves the main focus of the management for effective functioning in scbam a manufacturing enterprise. If asset management was neglected, then fixed assets weren’t being effectively and efficiently managed. But recently it has been realised efficient management of fixed assets like plant and machinery and other movable and immovable fixed assets can lead to economies of scale. Thus proper monitoring and regular maintenance of productive fixed assets will give an extended productive life. The web effect of this is more profits for the business.

Naturally in fixed asset management, the assets in charge of production, research and development etc., which may have direct bearing on the productivity of the company, have to be managed more closely. There must be constant monitoring on the maintenance aspect to prolong the useful life of the asset. Even a movable asset just like a vehicle needs proper maintenance. Otherwise without regular running and maintenance the vehicle can soon become corroded and useless.

Every group of assets requires a different focus of management. Fixed assets need regular maintenance to ensure 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 span of the asset for replacing the fixed asset at the conclusion of its useful life. Thus the newest plant and machinery may be ordered well in time to replace the old one.

Management also has to weigh the advantage of replacing the plant and machinery and other production assets or continuing to keep today’s production assets. Additionally they must consider from time to time perhaps the asset has become obsolete owing to new technological advances. In recent times, technology has advanced at a rapid pace and management has to be vigilant on this issue to avoid being put aside by competitors. Asset management also incorporates adequate insurance to cover any extraordinary losses because of fire and natural disasters.

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

In order to have reliability in scheduling, regular planning in conjunction with various departments, at least on a monthly basis is absolutely necessary. Standards must certanly be set as well comparative analysis within industry standards must certanly be evaluated to find out whether the company is achieving optimum production in accordance with the industry. If not, then suitable targets and best practices must certanly be setup inside a reasonable time frame to attain those targets.

Logistical performance should also be evaluated to take into account whether transportation costs are economical and features of location are met. The management tools for evaluation may be in kind of comparison studies, that may setup in kind of graphs and bar charts for easy visual comparison. If fixed asset performance is seen to be below par, then priorities may be fixed for the concentrate on improvement.

Asset management tracking is vital 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 certanly be monitored on a day-by-day basis. Senior financial officers must therefore be engaged in asset management.

According to nature of assets in different businesses. Like, utility companies, mineral companies, oil and natural gas are receiving large properties included in 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 the values and necessity to the running of the company, the assets may be categorized for better management.

To help company management, there are numerous established consultant companies having qualified manpower whose help will undoubtedly be beneficial for asset management. They can be very effective to audit present practices and suggest best practices, problem solving and action plans. It may be worth the expense to hire established consultants to improve performance.

Asset management data may be computerised to enable management to chalk out strategies on a general basis. Integration of asset management systems with other financial systems would give better picture of whole operation of the enterprise. This may enable various key officials to provide their timely input to top management to be able to devise suitable plans. Like, government may come out with special tax incentives for many industries to buy fixed assets. In a situation 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 is the assets of a small business which enable the production and delivery of its goods and services. Then when fixed assets are being purchased or replaced several important questions arise. What is the cost 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 does it benefit the company? Questions associated with the usage of the asset could be. What’re the operating costs? Just how much skilled and unskilled manpower could be needed for operation? What’re the training costs involved? What’re the installation costs? What is the useful life of the asset? Could it be the latest technology? These and additional questions have to be asked and answered. This may ultimately factor to the long-term strategy of the business.

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