Keeping track of the assets of the company is an important task that can save companies money and time.
This essential cog in the system not only helps companies keep afloat even in the most trying times, but it also gives them an edge against the competition. By implementing a smart asset management system, companies can focus their attention on other areas to grow their business and find reliable short term loan companies to improve areas such as sales, customer services, marketing, product/service improvement.
So, what exactly is asset management, and how does it have such a profound impact on every business? This post from luminablog.co.uk will show you everything you need to know.
What is Asset Management
Asset management is the process of planning and controlling the acquisition, operation, maintenance, renewal, and disposal of organizational assets. This process improves the delivery potential of assets and minimizes the costs and risks involved. Adequate maintenance and proper deployment of systems, people, and processes ensure a positive enhancement of capital over the asset lifecycle.
“Management” involves controlling every aspect that correlates to properly handling said assets. By knowing its basic definition, we can now start to understand the necessity for asset management and what it can do to improve a business.
Every company needs to keep track of its assets. That way, its stakeholders will know which assets are available to be employed to provide optimal returns. The assets owned by any business fall into two main categories: fixed and current assets. Fixed or non-current assets refer to assets acquired for long-term use, while current assets are those that can be converted into cash within a short amount of time.
When it comes to asset management, managers often deal with two main concerns. The first is what role does the asset management process play? Second, how can a firm develop a good asset management plan?
Types of Asset Management
While the definition of asset management may differ from one organization to another, they can be vastly classified into three types: physical, financial, and contractual.
Physical asset management stands for the process of handling things like fixed asset management, inventory management, infrastructure, and public asset management.
Financial asset management refers to the process of managing procurement, developing an investment strategy, controlling budget and costs, handling cash, bonds, and stocks.
Contractual compliance streamlines processes like IT asset management, digital asset management, contractual maintenance, and management of intangible assets.
Importance of Asset Management
There are several reasons why businesses should be concerned about asset management, including:
Enables A Firm to Account for All of Its Assets
The process makes it easy for organizations to keep track of their assets, whether liquid or fixed. Firm owners will know where assets are located, how they are being put to use, and whether there have been changes made to them. Consequently, the recovery of assets can be done more efficiently, hence, leading to higher returns.
Helps Guarantee the Accuracy of Amortization Rates
Since assets are checked on a regular basis, the process of asset management ensures that the financial statements record them properly.
Helps Identify and Manage Risks
Asset management encompasses the identification and management of risks that arise from the utilization and ownership of certain assets. It means that a firm will always be prepared to manage any risk that comes its way.
Removes Ghost Assets in The Company’s Inventory
Instances exist where lost, damaged, or stolen assets are erroneously recorded on the books. With a strategic asset management plan, the firm’s owners will be aware of the assets that have been lost and will eliminate them in the books.