Most manufacturing companies have recently unearthed that fixed asset management should be a key area of the success of the business enterprise. It’s now realised that fixed asset management contributes to economy of production and operation. Therefore can to increase in profits of 10 to 15 per cent, which can’t be ignored since it makes a substantial contribution to the underside distinct the business.
There is without doubt that inventory and production management deserves the key focus of the management for effective functioning in scbam a manufacturing enterprise. If asset management was neglected, then fixed assets were not being effectively and efficiently managed. But recently it’s 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 can give a longer productive life. The internet aftereffect of that is more profits for the business.
Naturally in fixed asset management, the assets in charge of production, research and development etc., which have direct bearing on the productivity of the business, must be managed more closely. There has to be constant monitoring on the maintenance aspect to prolong the useful life of the asset. A movable asset such as 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 depending on the wear and tear on the asset. Adequate planning can be essential for building up financial reserves over the life span of the asset for replacing the fixed asset by the end of its useful life. Thus the newest plant and machinery could be ordered well in time for you to replace the old one.
Management also must weigh the main advantage of replacing the plant and machinery and other production assets or continuing to keep up the current production assets. In addition they must consider from time to time perhaps the asset is now obsolete owing to new technological advances. In recent years, technology has advanced at a rapid pace and management must be vigilant on this matter in order to avoid being left out by competitors. Asset management also incorporates adequate insurance to cover any extraordinary losses because of fire and natural disasters.
A type of awakening has taken devote major industries during the past decade on the role of asset management. It is now attractive because of decreasing margins and competition growing day by day. To avoid major capital spending, companies are now developing strategies to have optimum performance from available fixed assets thereby getting increased returns. This implies proper schedule of maintenance to minimise breakdowns and consequent loss of production.
In order to have reliability in scheduling, regular planning together with various departments, at least on a monthly basis is absolutely necessary. Standards should be set as well comparative analysis within industry standards should be evaluated to determine whether the organization is achieving optimum production in line with the industry. If not, then suitable targets and best practices should be create within a reasonable timeframe to achieve those targets.
Logistical performance must be evaluated to consider whether transportation costs are economical and advantages of location are met. The management tools for evaluation could be in form of comparison studies, which could create in form of graphs and bar charts for quick visual comparison. If fixed asset performance is observed to be below par, then priorities could be fixed for the give attention to improvement.
Asset management tracking is essential in large manufacturing plant and utilities. Integration of asset management with raw material and maintenance procurement systems as well as financial systems and their cost versus savings benefits should be monitored on a day-by-day basis. Senior financial officers must therefore be engaged in asset management.
Depending on nature of assets in different businesses. For example, utility companies, mineral companies, oil and natural gas are having large properties as part of their assets. These have to be effectively managed and timely decisions have to be taken whether to purchase or sell properties for the healthiness of the business. Depending on the values and necessity to the running of the organization, the assets could be categorized for better management.
To assist company management, you can find numerous established consultant companies having qualified manpower whose help will be beneficial for asset management. They can be extremely effective to audit present practices and suggest best practices, problem solving and action plans. It might be well worth the cost to hire established consultants to improve performance.
Asset management data could be computerised allow management to chalk out strategies on an overall basis. Integration of asset management systems with other financial systems would give better picture of whole operation of the enterprise. This can enable various key officials to provide their timely input to top management in order to devise suitable plans. For example, government may come out with special tax incentives for several industries to buy fixed assets. In a scenario 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’s the assets of a company which enable the production and delivery of its goods and services. So when fixed assets are being purchased or replaced a couple of important questions arise. What’s the cost and cost benefit for the business. What funds are available? Should the asset be purchased new or secondhand or should it be leased and how will it benefit the business? Questions relating to the use of the asset could be. What are the operating costs? Just how much skilled and unskilled manpower could be needed for operation? What are the training costs involved? What are the installation costs? What’s the useful life of the asset? Is it the most recent technology? These and a lot more questions must be asked and answered. This can ultimately factor to the long-term strategy of the business.