From the general point of view, asset management is the process of developing and cost-effectively maintaining assets on behalf of an individual or a firm. The term asset management is a diverse term that can stand for different meanings.
In a nutshell, every company or entity needs to keep records of all the assets, either fixed or current. In business, fixed assets or non-current assets are those that the firm intends for long-term use while existing assets refer to assets that you can easily convert into cash on short notice.
In asset management, there are two key terms every business should get the hang of, namely, the role of asset management and its processes and how a company can develop a good management plan for its assets.
Significance of asset management
There are various reasons why businesses involve in asset management. It includes the following:
Keep track of all its assets
Asset management helps organizations keep track of their assets in and outside. Whether fixed or current assets, every organization needs to know the physical location of these assets. Keeping track of its assets means making sure accountability and control of its use. When it is time to recover some of these assets, an organization can do it efficiently and within the time frame allotted.
Helps guarantee accuracy
Asset management systems allows the organization to keep track of its assets and update its value regularly to ensure that the figures appearing on financial statements reflect the actual value of assets at a particular time.
Risk management and identification
Keeping track of an organization’s assets enables it to identify risks in advance and plan accordingly to avert the risks instead of waiting until they come their way. Risks come in different ways, including depreciation, inflations, obsolescence, and more.
It helps a company get rid of ghost assets if present
Sometimes non-existent assets still feature in records even when they are stolen, damaged, or lost. Strategic asset management will help identify ghost items and remove them from financial records. Removing ghost assets from financial records allows the finance department to produce financial reports that reflect an organization’s real financial state.
Asset management planning
It is the ultimate dream of a business entity or company to own assets. Having an asset management plan helps organizations and businesses plan strategic ways of acquiring assets. At every end of the financial year, an organization audits all of its assets and keeps them in an inventory to manage them effectively. For the organization’s support to reflect accurately in financial records, factors such as depreciation must regularly be updated and computed accordingly according to its lifecycle. Many businesses make the wrong financial decisions because they are taking into consideration the initial costs.
Long-term financial projections
Fixed assets acquired by an organization feature in long-term business goals; for example, the land is an asset that appreciates year after the other. The business needs asset management planning to set its priorities right.
Perks for asset management
In keeping tabs on every asset in the organization, managers can plan proper acquisition and its use. Having an asset management tool makes it easy for a business to comply with government policies and regulations.
Asset management software helps companies track assets and streamline their operations like sales and acquisition.