Most manufacturing companies have recently unearthed that fixed asset management should be described as a key area of the success of the business enterprise enterprise. It’s now realised that fixed asset management contributes to economy of production and operation. As a result can to boost in profits of 10 to 15 per cent, which can not be ignored since it makes an important contribution to underneath distinct the business.
There is without doubt that inventory and production management deserves the main focus of the management for effective functioning in scbam a production enterprise. If asset management was neglected, then fixed assets were not being effectively and efficiently managed. But in recent years it has been realised efficient management of fixed assets like plant and machinery and other movable and immovable fixed assets can result in economies of scale. Thus proper monitoring and regular maintenance of productive fixed assets gives a longer productive life. The internet effect of that is more profits for the business.
Naturally in fixed asset management, the assets responsible for production, research and development etc., which may have direct bearing on the productivity of the business enterprise, need to be managed more closely. There must be constant monitoring on the maintenance aspect to prolong the useful life of the asset. Even a movable asset such as a vehicle needs proper maintenance. Otherwise without regular running and maintenance the automobile can soon become corroded and useless.
Every category of assets requires a different focus of management. Fixed assets need regular maintenance to ensure normal life of the assets with regards to the wear and tear on the asset. Adequate planning can be necessary for gathering financial reserves over the life span of the asset for replacing the fixed asset at the end of its useful life. Thus the newest plant and machinery could be ordered well in time and energy to replace the old one.
Management also must weigh the advantage of replacing the plant and machinery and other production assets or continuing to keep up today’s 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 to avoid being put aside by competitors. Asset management also contains adequate insurance to cover any extraordinary losses due to fire and natural disasters.
A form of awakening has brought place in major industries during the past decade on the role of asset management. It is now attractive due to decreasing margins and competition growing day by day. To prevent major capital spending, companies are actually developing strategies to obtain optimum performance from available fixed assets thereby getting increased returns. This calls for proper schedule of maintenance to minimise breakdowns and consequent loss in production.
To be able to have reliability in scheduling, regular planning together with various departments, at the very least on a monthly basis is completely necessary. Standards must be set as well comparative analysis within industry standards must be evaluated to determine whether the company is achieving optimum production consistent with the industry. Or even, then suitable targets and best practices must be put up inside a reasonable timeframe to reach those targets.
Logistical performance should also be evaluated to think about whether transportation costs are economical and benefits of location are met. The management tools for evaluation could be in form of comparison studies, which could put up in form of graphs and bar charts for easy visual comparison. If fixed asset performance sometimes appears to be below par, then priorities could be fixed for the focus on improvement.
Asset management tracking is vital in large manufacturing plant and utilities. Integration of asset management with raw material and maintenance procurement systems in addition to financial systems and their cost versus savings benefits must be monitored on a day-by-day basis. Senior financial officers must therefore be concerned in asset management.
Based on nature of assets in various businesses. For instance, utility companies, mineral companies, oil and natural gas are receiving large properties within their assets. These have to be effectively managed and timely decisions have to be taken whether to get or sell properties for the healthiness of the business. Depending on the values and necessity to the running of the company, the assets could be categorized for better management.
To assist company management, you will find several established consultant companies having qualified manpower whose help is going to be beneficial for asset management. They can be quite effective to audit present practices and suggest best practices, problem solving and action plans. It might be really worth the trouble to hire established consultants to improve performance.
Asset management data could be computerised to enable management to chalk out strategies on a general basis. Integration of asset management systems with other financial systems will 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 instance, government may emerge with special tax incentives for many industries to invest in fixed assets. In a situation 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 business which enable the production and delivery of its goods and services. When fixed assets are now being purchased or replaced several important questions arise. What’s the cost and cost benefit for the business. What funds are available? If the asset be purchased new or secondhand or should it be leased and how does it benefit the business enterprise? Questions associated with the utilization of the asset could be. What are the operating costs? Simply how much skilled and unskilled manpower would be required for operation? What are working out costs involved? What are the installation costs? What’s the useful life of the asset? Can it be the latest technology? These and many more questions need to be asked and answered. This can ultimately factor to the long-term strategy of the business.