Assets, such as current, fixed, tangible, and intangible, have great importance to any business or enterprise as it is an accounting basic you can’t ignore. Since assets have the potential to make or break a company, it is vital to deal with their life cycles wisely. However, many companies often fail to manage their assets properly; therefore, in this article, we have discussed how important it is to manage your company assets profitably.
What is Asset Management?
In the fewest possible words, asset management incorporates the development, maintenance, and sale of assets in a cost-effective way. The term – third-party asset management, most commonly used in finance, refers to firms and individuals that manage other entities’ assets.
Know More About Asset Management
The broad term ‘asset management‘ describes the management of assets or investments on oneself or on behalf of others. The process typically includes two essential priorities – asset appreciation & lowering risks. As investment minimums are pre-determined, this service is most commonly hired by financial intermediaries, individuals, corporations, and government entities with high net worth.
While managing your assets, your prime objective should be ‘growing your company’s portfolio’ by determining what investments should be made and which ones to avoid. For this, you need to conduct thorough research utilizing both micro and macro analytical tools. This generally includes statistical analysis of growing market trends, financial talks with company officials, and everything else that can help achieve the determined target of asset appreciation.
Note: The advisors or asset managers, most commonly, invest in products, such as equity, mutual funds, fixed income, commodities, real estate, and other investment platforms.
Asset Lifecycle Management
The first and foremost focus of asset management is not entirely on the assets. The actual priority is the value they deliver to the businesses that own them, over their entire lifecycle, from the pre-purchase stage to the time of disposal.
The efficient management of the asset lifecycle requires optimizing the profits while minimizing the costs of purchase, operation, maintenance, renewal, and disposal of assets.
Why are Company Assets Important?
Assets, such as equipment and property, are valuable items that your company leases or owns to operate. They can also be called a means of getting value for your business, for example, customer relations, intellectual property, and goodwill.
Assets are highly important for any company as they can help:
- increase value
- generate revenue
- facilitate the business operations
A company can anytime sell or transfer assets or utilize them to lower tax deduction, and increase business efficiency.
Every company requires keeping track of its assets as they play an important, central (to be precise) role in how the business operates. By keeping track of your company assets, you get accurate information on what assets are available with you and which ones can be utilized to get optimal returns. For daily operations, asset management is highly essential and should not be ignored. Let’s discuss some reasons why you should properly manage your assets and their records.
In-depth Knowledge of Assets is Important
Many businesses have now started realizing how much productivity they can lose if they don’t manage and keep track of their assets. Counting the number of assets and entering them into an excel sheet is not enough for adequate asset management. Getting in-depth and detailed information about an assets’ value over their lifecycle helps companies to save money and allows them to get the best from each asset.
If you know exactly where your assets are, who holds them, and what their condition, you can efficiently eliminate problems that cost you a lot, along with preventing duplicate purchases and last-minute requirements of maintenance. Having complete information of the valuable assets with its 24X7 availability to employees can enhance accountability and efficiency in keeping track of the same.
Stay One Step Ahead of Your Competitors
Using a powerful asset management system for your business lets you focus on more on aspects that can boost your business growth, such as marketing, sales, and customer service. Complete knowledge of your assets helps you take the lead in the industry and understand what should be done to prepare for the future.
For businesses that hold inventory and sell it further, they frequently obtain real-time information on what items they have in stock, what items are getting low in numbers, and at what time they need to reorder specific items. Similarly, you don’t want your customers to approach your competitors just because you’ve run out of stock. This way, proper management of assets helps many companies stay one step ahead of the competitors.
Increase in Workflow & Productivity
Efficient management and accurate tracking of assets have also been proven to help improve workflow & productivity, reduce record losses (in case of a natural disaster), employee theft, and eliminate the incidents of misplaced or lost assets that are generally called ghost assets. Proper asset management allows effective & fruitful planning within your company, making employees more responsible and accountable.
Loss of Assets due to Theft
Adding to the aforementioned reasons, your company surely owns several small-size but very precious assets, such as expensive equipment, desktops, laptops, and tablets. If one of such small size items get stolen one day, it would be very difficult to notice its absence, at least for a few days after its theft. When something like this happens, and you don’t get to find that item for long, it is stolen. Here, had you maintained proper records of your assets, you could have got to know about the missing ones and proceed further accordingly.
Loss of Assets due to an Environmental Disaster
In case your company, unfortunately, suffers a catastrophic loss ever, do you have accurate records of your assets that you can later match with the lost ones? If no, it is high time to get robust asset management and tracking system so that you would, at least, know what asset items are lost and how many are left with you.
“In 1998-2017 disaster-hit countries also reported direct economic losses valued at US$ 2,908 billion, of which climate-related disasters caused US$ 2,245 billion or 77% of the total.” Source
Investors Consider Visible Assets
If you want your company to attract more investors, you should start making organized reports of your assets because that’s what most investors are concerned about. Say you have a substantial value in fixed assets which is visible on your Balance Sheet, would you be able to show the numbers with solid reports if they ask you to? If you fail to prove what your balance sheet says about your assets is true, the interested investors will find a lack of credibility in your company.
Bring More Transparency and a Centric Platform for Asset Reporting
Experts keep on suggesting us to do more with less, and the same even applies to asset management. Have a system to record assets where multiple departments can enter never-ending asset information consistently in an easy-to-understand format. Business processes can become streamlined with company-wide communication and transparency.
For companies having branches throughout the globe, a special centric system will allow all the employees to share asset information on one single platform, promoting more transparency and ease in asset management.
Conclusion
The importance of asset management is as much as the importance of employees for a company. Managing assets efficiently helps in locating where the assets are being used and if there’s a need for change. This also improves the accuracy of the check-in/check-out system; if any of your employees use an asset, you will have it in your notice, and knowing this, employees will return the assets on time to precisely the department it belongs to.
Are you thinking about the future? It also helps identify possible risks that might arise due to the utilization or ownership of certain assets. At times, you might see an item that isn’t performing as per your expectations or has never been used, or frequently requires repairs; tracking your assets helps you identify which assets are bringing profits and which ones can harm your company’s financial health throughout their lifecycle.
