Most manufacturing companies have recently learned that fixed asset management should be considered a key area of the success of the business enterprise enterprise. It’s now realised that fixed asset management results in economy of production and operation. This in turn can to improve in profits of 10 to 15 per cent, which can’t be ignored since it makes a significant contribution to underneath type of the business.
There is without doubt that inventory and production management deserves the key focus of the management for effective functioning in a production enterprise. If asset management was neglected, then fixed assets weren’t being effectively and efficiently managed. But in recent years 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 will give a lengthier productive life. The internet effect of this is more profits for the business.
Naturally in fixed asset management, the assets accountable for production, research and development etc., which may have direct bearing on the productivity of the business enterprise, have to be managed more closely. There should be constant monitoring on the maintenance aspect to prolong the useful life of the asset. Even a movable asset like 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 make certain normal life of the assets depending on the wear and tear on the asset. Adequate planning can also be essential for building up financial reserves over living of the asset for replacing the fixed asset at the conclusion of its useful life. Thus the brand new plant and machinery may be ordered well in time and energy to replace the old one.
Management also needs to weigh the main advantage of replacing the plant and machinery and other production assets or continuing to keep today’s production assets. They also must consider from time to time perhaps the asset has become obsolete owing to new technological advances ktam. Recently, technology has advanced at a rapid pace and management needs to be vigilant on this matter in order to avoid being put aside by competitors. Asset management also includes adequate insurance to cover any extraordinary losses because of fire and natural disasters.
A form of awakening has taken devote major industries during the past decade on the role of asset management. It has become attractive because of decreasing margins and competition growing day by day. To avoid major capital spending, companies are actually developing strategies to have optimum performance from available fixed assets thereby getting increased returns. This calls for proper schedule of maintenance to minimise breakdowns and consequent loss of production.
To be able to have reliability in scheduling, regular planning in conjunction with various departments, at the least on a regular basis is absolutely necessary. Standards must be set as well comparative analysis within industry standards must be evaluated to ascertain whether the company is achieving optimum production in accordance with the industry. Or even, then suitable targets and best practices must be set up in just a reasonable time frame to achieve those targets.
Logistical performance must be evaluated to consider whether transportation costs are economical and benefits of location are met. The management tools for evaluation may be in kind of comparison studies, that may set up in kind of graphs and bar charts for easy visual comparison. If fixed asset performance is seen to be below par, then priorities may be fixed for the focus on improvement.
Asset management tracking is critical in large manufacturing plant and utilities. Integration of asset management with raw material and maintenance procurement systems along with 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.
According to nature of assets in different businesses. As an example, utility companies, mineral companies, oil and natural gas are receiving 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 fitness of the business. Depending on their values and necessity to the running of the company, the assets may be categorized for better management.
To assist company management, you can find numerous established consultant companies having qualified manpower whose help will undoubtedly be necessary for asset management. They can be very effective to audit present practices and suggest best practices, problem solving and action plans. It may be really worth the trouble to hire established consultants to enhance performance.
Asset management data may be computerised to enable management to chalk out strategies on a standard 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. As an example, government may emerge with special tax incentives for certain industries to buy 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 take advantage of the government’s tax incentive for that business.
Lastly, it is the assets of a small business which enable the production and delivery of its goods and services. When fixed assets are now being purchased or replaced a couple of important questions arise. What is the cost and cost benefit for the business. What funds can be found? Should the asset be purchased new or secondhand or should it be leased and how can it benefit the business enterprise? Questions relating to the utilization of the asset could be. What are the operating costs? How much skilled and unskilled manpower could be required for operation? What are working out costs involved? What are the installation costs? What is the useful life of the asset? Could it be the newest technology? These and many more questions have to be asked and answered. This can ultimately factor in to the long-term strategy of the business.