Most manufacturing companies have recently found that fixed asset management should be a key area of the success of the business enterprise. It’s now realised that fixed asset management results in economy of production and operation. As a result can to increase in profits of 10 to 15 per cent, which can not be ignored because it makes a substantial contribution to the underside type of the business.
There’s no doubt that inventory and production management deserves the main focus of the management for effective functioning in scbam a manufacturing enterprise. If asset management was neglected, then fixed assets weren’t being effectively and efficiently managed. But lately 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 net effectation of this really 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, have to be managed more closely. There should be constant monitoring on the maintenance aspect to prolong the useful life of the asset. A movable asset just like a vehicle needs proper maintenance. Otherwise without regular running and maintenance the vehicle can soon become corroded and useless.
Every sounding assets needs a different focus of management. Fixed assets need regular maintenance to make sure normal life of the assets with regards to the wear and tear on the asset. Adequate planning is also essential for building up financial reserves over living of the asset for replacing the fixed asset at the end of its useful life. Thus the newest plant and machinery may be ordered well in time to replace the old one.
Management also has to weigh the advantage of replacing the plant and machinery and other production assets or continuing to maintain the present production assets. They also must consider from time to time whether the asset is now obsolete owing to new technological advances. In recent years, technology has advanced at a rapid pace and management has to be vigilant on this matter in order to avoid being left behind by competitors. Asset management also contains adequate insurance to cover any extraordinary losses due to fire and natural disasters.
A form of awakening has taken devote 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. In order to avoid major capital spending, companies are actually developing strategies to get optimum performance from available fixed assets thereby getting increased returns. This requires proper schedule of maintenance to minimise breakdowns and consequent loss in production.
In order to have reliability in scheduling, regular planning along with various departments, at the least on a regular basis is completely necessary. Standards should be set as well comparative analysis within industry standards should be evaluated to find out whether the business is achieving optimum production in line with the industry. If not, then suitable targets and best practices should 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 advantages of location are met. The management tools for evaluation may be in kind of comparison studies, which can 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 vital 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.
Based on nature of assets in numerous businesses. For example, 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 health of the business. Depending on the values and necessity to the running of the business, the assets may be categorized for better management.
To aid company management, you can find several established consultant companies having qualified manpower whose help will soon be necessary for asset management. They can be extremely effective to audit present practices and suggest best practices, problem solving and action plans. It may be worth the expense to hire established consultants to enhance performance.
Asset management data may be computerised allow 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 may enable various key officials to give their timely input to top management to be able to devise suitable plans. For 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 being purchased or replaced a few important questions arise. What is the fee 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 does it benefit the business? Questions associated with the usage 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 is the useful life of the asset? Could it be the most recent technology? These and many more questions have to be asked and answered. This may ultimately factor in to the long-term strategy of the business.