Most manufacturing companies have recently learned that fixed asset management should be considered a key part of the success of the company enterprise. It’s now realised that fixed asset management results in economy of production and operation. Therefore can to improve in profits of 10 to 15 per cent, which cannot be ignored because it makes an important contribution to the bottom line of the business.
There is without doubt that inventory and production management deserves the main focus of the management for effective functioning in 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 result in economies of scale. Thus proper monitoring and regular maintenance of productive fixed assets will give a lengthier productive life. The internet effectation of this really is more profits for the business.
Naturally in fixed asset management, the assets accountable for production, research and development etc., which have direct bearing on the productivity of the company, have to be managed more closely. There has to be constant monitoring on the maintenance aspect to prolong the useful life of the asset. A good 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 ensure normal life of the assets with respect to the wear and tear on the asset. Adequate planning is also necessary for building up financial reserves over the life of the asset for replacing the fixed asset at the end of its useful life. Thus the new plant and machinery could 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 up the present production assets. Additionally they must consider from time to time whether the asset has become obsolete owing to new technological advances ktam. In recent times, technology has advanced at a rapid pace and management needs to be vigilant on this matter in order to avoid being left out by competitors. Asset management also contains adequate insurance to cover any extraordinary losses because of fire and natural disasters.
A form of awakening has brought 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 now actually developing strategies to obtain optimum performance from available fixed assets thereby getting increased returns. This requires proper schedule of maintenance to minimise breakdowns and consequent lack of production.
To be able to have reliability in scheduling, regular planning along with various departments, at the least on a monthly basis is absolutely necessary. Standards must be set as well comparative analysis within industry standards must be evaluated to determine whether the organization 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 period to attain those targets.
Logistical performance must be evaluated to take into account whether transportation costs are economical and benefits of location are met. The management tools for evaluation could be in kind of comparison studies, which can set up in kind of graphs and bar charts for quick visual comparison. If fixed asset performance is seen to be below par, then priorities could be fixed for the focus on improvement.
Asset management tracking is essential 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 engaged in asset management.
Depending on nature of assets in various businesses. As an example, utility companies, mineral companies, oil and natural gas are experiencing large properties within their assets. These need to be effectively managed and timely decisions need to be taken whether to buy or sell properties for the fitness of the business. Depending on their values and necessity to the running of the organization, the assets could be categorized for better management.
To assist company management, there are numerous established consultant companies having qualified manpower whose help will be good for asset management. They can be very effective to audit present practices and suggest best practices, problem solving and action plans. It might be worth the expense 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 will enable various key officials to offer their timely input to top management to be able to devise suitable plans. As an example, government may come out with special tax incentives for certain 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 small business which enable the production and delivery of its goods and services. Then when fixed assets are increasingly being purchased or replaced several important questions arise. What’s the price 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 can it benefit the company? Questions relating to the use of the asset could be. What are the operating costs? Just how much skilled and unskilled manpower would be required for operation? What are the training costs involved? What are the installation costs? What’s the useful life of the asset? Is it the latest technology? These and a lot more questions have to be asked and answered. This will ultimately factor in to the long-term strategy of the business.