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Why Is The Need For Managing Assets and What Are The Steps Required?

4 Mins read

There is a need of managing assets because it helps an organization to monitor and manage their assets using a systemized approach. Effectively managed assets will benefit the organization providing it the improvement in productivity and efficiency which takes a business in a better position increasing their return on investment. 

With asset management approach, it allows the officials to track the overall performance of their assets ensuring their efficient utilization, properly reviewed performance and prevention of unnecessary, additional costs that occur due to incidents (like unscheduled downtime).

Keeping track of your assets and equipment (such as machines) is an essential task for an organization that facilitates hardware and software management, license compliance, regulatory compliance, and security. In fact, an automated asset management solution can save you time, money, and lots of management issues.

Tracking the assets of the company is an essential task which saves money and time. Asset management is the process of maximizing the asset value so that to provide maximum possible returns to investments. It also involves asset recovery with a wide range of assets i.e., fixed and liquid assets. For a business it is important to manage its assets and equipment, and use them to get the maximum possible returns. 

Need of Managing Assets

  • Management of assets allows the organization to keep track of all assets. The asset management process enables the organization to know where the assets are located, how they are utilized, and what changes are being done. The data received from the asset management solution ensures the asset recovery that ultimately leads to better returns. 
  • You can manage all your assets from various locations in an accurate and effective manner. You can also create an inventory report which is required for insurance or lease finances. 
  • The process of asset management can be used to ensure the accuracy of amortization rates. Regular assessments over assets will tell the accurate financial statements of the business. 
  • Asset recovery is also an important part of the procedure which is automatically reflected in the system. Whenever the asset is discarded or sold, that asset will be removed from the records and books of the business. Also, the assets which include consumables and spare parts are written to free storage space.
  • During the operational phase of the asset (asset life cycle), the organization faces some maintenance or over maintenance problems which cause some business expense. Also, overdoing the maintenance will also charge significant costs where under-maintenance will lead to reduced productivity.
  • Maintenance brings more efficient operations allowing the organization to understand the real capabilities of its assets, and its efficient operation in the most effective manner. 
  • Asset management program also allows the implementation of a risk management plan including the management of the risks connected with the utilization and ownership of the assets. Accurate assessment of assets can help to identify the risks involved, and come up with a solution to avoid them. 
  • Proper asset management allows to optimize all your assets operations that includes planning, resources use, and in the implementation of the system. 
  • Removal ghost asset from your inventory is a painful task. There are times when items are either have been lost or stolen but they still exist in the inventory records. These assets are known as ghost assets. Often, ghost assets are items that are recorded inaccurately. 
  • With the use of automated asset management software, incidents like loss and thefts are reduced with the help of proper accounting of the asset recovery process. This ensures that the organization will maximize the returns with zero lost items in the process. 

Proper management plan is developed and scheduled for an effective and efficient asset management system to work. Proper planning provides an easier way to understand the objectives and goals of asset management strategy for the organization in long run.

Steps required to manage Assets 

Step 1. To Complete your asset inventory  

To effectively manage all the assets in your organization you need to know what assets you have, exactly, to be accurate. Before developing any plan, you must have a look at your assets by conducting a complete asset inventory to help you on the basis of your plan to be sure. In the inventory it will include: 

  • What assets do you have?
  • Where are they located?
  • What are their values?
  • When were they bought? 
  • What is their expected life-cycles?

Step 2. Calculation of life-cycle costs 

To accurately proceed with your plan, you have to calculate your assets life-cycle costs rather than just their initial purchase cost. As in an average life cycle duration of an asset, there are many opportunities for added costs, such as maintenance, condition, capital cost, performance and costs involved in its disposal. So, for your asset management plan to work you need accurate life-cycle costs. 

Step 3. Levels of service 

You should also include levels of service to calculate the quality, quantity, functionality and safety of the various services that all your assets provide. The frequency of maintaining those services will reflect the operational, maintenance and renewal activities that will be required to move further. To access levels of service, you shall know: 

  • What service you currently provide?
  • How this service is expected to change? 
  • The annual cost of your current service? 
  • Presence of funding to support your Service, if any?
  • If the current service needs to meet expectation of any user?

Step 4. Implementation of cost-effective asset management  

There are two types of management proactive and reactive maintenance. Mostly, proactive management is cost-effective in the long-term as compared to reactive management. For example, if you wait until the breakdown of any equipment to put it under maintenance, you will end up to spend much money than, if you, proactively perform maintenance time-to-time, which is naturally cost-effective maintenance management where you maintain, repair or replace the asset or spare parts at the right time (at regular intervals) during the assets’ life-cycle.

Step 5. Execute financial planning for long run

The asset management plan should be beneficial for you in terms of financial planning for long run that will help you to determine the feasibility of objectives in your organization which are naturally important and can help you maintain your priority over the assets in long run. 

An asset management strategy ensures that an organization’s assets are used in the most efficient manner and enhance its profitability. It is widely practised by many large organizations, educational institutes, government agencies, and even small businesses can benefit from asset management programs, too. Such a strategy can help organizations to achieve the asset management benefits at the lowest cost while maximizing their asset’s lifespan.

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