Need to understand more about asset management? Well we have the answers.
What is an asset?
Let’s begin with the term ‘asset’. An ‘Asset’ is a resource (like an item, stakes, etc.). Each of these has an economic value that is expected to be beneficial in the future. Essentially, ‘assets’ are those which can improve sales, reduce expenses or generate cash flow. All kinds of businesses, small or large, create or build assets to increase the operations and increate value. It is an important aspect of building a business. So companies invest a lot in managing their assets. Most companies invest in short-term (or current) assets, fixed assets, financial assets and intangible assets.
What is asset management?
Asset management refers to how funds are managed. It includes the development, operation, maintenance and selling of the assets in a way that brings profit for the organisation in the future. There are people and companies which work full time on managing assets on behalf of companies.
Why Is Asset Management Important?
Asset management helps a company keep a track of their stakes. Apart from the above benefits, asset management helps in building amortisation rates accuracy. As well as identifying and managing risks. It also helps to remove ghost assets in the inventory of a company. Further benefits include:
Tracking of assets
Asset management helps an organisation keep a check on their fixed and liquid assets. It gives a wider look at the success graph of that company. As well and help the investor to analyse it for future opportunities. The owner knows their assets, their locations and their usages. So this makes asset recovery effective and efficient.
Risk identification and management
A company needs to keep a check on its progress; the rise or fall of the asset count or amount gives a broad view of the status. The company can then identify the risk if it sees a fall in the assets. It makes risk management easier and accessible. It also helps build rates of amortisation accuracy. In the tech-oriented and fast-paced world, keeping yourself updated is the trick to shine. One of the functions of asset management is to keep the financial statements updated which achieves this purpose.
Further to this in finance and accounts, book keeping includes loss, damage and stolen assets. Strategic asset management plans helps in keeping the company aware of the lost and damaged assets. So, preventing them from adding to the books and ledger.
Every company (be it non-profit organisation, government agencies and companies) have to submit a detailed report of the ways they have used to acquire, use and dispose its assets. In this case, it is eased by the central database which holds all the required information. Asset management removes any backlogs and hurdles and makes it easy to represent the financial report.
Improving Acquisition and Use
Having a strategy always helps. It takes a business to the next level. It refines the business and discovers the issues and bad practices followed.
Developing a strategic asset management lan
Any enterprise, be it private or public, have to maintain assets and ownership. For the smooth functioning of the organisation, the companies have to develop a strategy to build strategies. A Sstrategic Asset Management Plan achieves the following:
Enlist all assets
In accounts language, we call it completing an asset inventory. The owner must keep an eye on the number of the assets in his inventory. To be successful, a proper sheet must be maintained. It is because the strategies will differ accordingly as per the number and the value of the assets available with one. Managing them effectively will become a problem. There are certain aspects which are to be prepared an inventory of the assets. These are where the assets are, total count of assets, the value of each asset, when the assets were acquired, the expected life cycles of the assets.
Figure out life-cycle costs
Computation of the life-cycle costs of each asset plays a key role in building assets of companies. Life cycle costs include the cost of the entire process from the beginning to the end. Most business owners just focus on the initial purchase costs. This is a mistake. The additional costs comprise of maintenance expenses, performance modelling, disposal costs and condition modelling.
Set Levels of Service
This step means outlining the overall quality, capacity and rolling of different services that the assets provide. The computation of the life-cycle costs is an important step in the development of the strategic asset management plan to build a successful company. It will help to determine the operating, maintenance and renewal of the activities.