Most manufacturing companies have recently unearthed that fixed asset management should be a key the main success of the company enterprise. It’s now realised that fixed asset management leads to economy of production and operation. This in turn can to improve in profits of 10 to 15 per cent, which can not be ignored as it makes a significant contribution to the bottom line of the business.
There’s no doubt that inventory and production management deserves the key 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 can give an extended productive life. The net aftereffect of that 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 company, need 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 such as for instance a vehicle needs proper maintenance. Otherwise without regular running and maintenance the car can soon become corroded and useless.
Every sounding assets needs a different focus of management. Fixed assets need regular maintenance to make certain normal life of the assets with regards to the wear and tear on the asset. Adequate planning can be required 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 brand new 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 keep today’s production assets. They also must consider from time to time if the asset is becoming obsolete owing to new technological advances ktam. Recently, technology has advanced at a rapid pace and management has to be vigilant on this problem in order 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 devote major industries in the past decade on the role of asset management. It is becoming attractive due to decreasing margins and competition growing day by day. To prevent major capital spending, companies are now actually developing strategies to have optimum performance from available fixed assets thereby getting increased returns. This requires proper schedule of maintenance to minimise breakdowns and consequent loss in production.
To be able to have reliability in scheduling, regular planning in conjunction with various departments, at least on a regular 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 in line with the industry. Or even, then suitable targets and best practices must be setup within a reasonable time period to attain those targets.
Logistical performance must also be evaluated to consider whether transportation costs are economical and benefits of location are met. The management tools for evaluation may be in form of comparison studies, which can setup in form of graphs and bar charts for quick visual comparison. If fixed asset performance is observed to be below par, then priorities may 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.
According to nature of assets in numerous 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 buy or sell properties for the health of the business. Depending on their values and necessity to the running of the company, the assets may be categorized for better management.
To help company management, you can find numerous established consultant companies having qualified manpower whose help will soon be beneficial for asset management. They can be very effective to audit present practices and suggest best practices, problem solving and action plans. It might be really worth the expense to hire established consultants to enhance performance.
Asset management data may 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 may enable various key officials to provide their timely input to top management to be able to devise suitable plans. For example, government may come out with special tax incentives for certain industries to purchase 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 is the assets of a company which enable the production and delivery of its goods and services. So when fixed assets are now being purchased or replaced several important questions arise. What is 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 can it benefit the company? Questions relating to the use of the asset could be. What’re the operating costs? Simply how much skilled and unskilled manpower could be required for operation? What’re working out costs involved? What’re the installation costs? What is the useful life of the asset? Can it be the newest technology? These and additional questions need to be asked and answered. This may ultimately factor into the long-term strategy of the business.