Most manufacturing companies have recently learned that fixed asset management should be described as a key part of the success of the business enterprise. It is now realised that fixed asset management contributes to economy of production and operation. This in turn can to increase in profits of 10 to 15 per cent, which can’t be ignored as it makes an important contribution to underneath distinct the business.
There is undoubtedly 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 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 an extended productive life. The internet effectation of this is more profits for the business.
Naturally in fixed asset management, the assets responsible for production, research and development etc., which have direct bearing on the productivity of the business, 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 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 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 be necessary for building up financial reserves over the life span of the asset for replacing the fixed asset by the end of its useful life. Thus the new plant and machinery may be ordered well in time and energy 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 up the current production assets. In addition they must consider from time to time if the asset is becoming obsolete owing to new technological advances. In recent times, technology has advanced at a rapid pace and management has to be vigilant on this matter to avoid being left behind by competitors. Asset management also contains adequate insurance to cover any extraordinary losses as a result of fire and natural disasters.
A form of awakening has taken devote major industries in the past decade on the role of asset management. It is becoming attractive as a result of decreasing margins and competition growing day by day. To avoid major capital spending, companies are now 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.
In order to have reliability in scheduling, regular planning in conjunction with various departments, at the very least on a regular basis is absolutely necessary. Standards must certanly be set as well comparative analysis within industry standards must certanly be evaluated to ascertain whether the company is achieving optimum production in line with the industry. If not, then suitable targets and best practices must certanly be setup inside a reasonable timeframe to reach 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, which could setup in kind of graphs and bar charts for quick visual comparison. If fixed asset performance is seen to be below par, then priorities may be fixed for the concentrate on improvement.
Asset management tracking is critical 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 must certanly be monitored on a day-by-day basis. Senior financial officers must therefore be concerned in asset management.
Based on nature of assets in various businesses. Like, utility companies, mineral companies, oil and natural gas are experiencing 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 the values and necessity to the running of the company, the assets may be categorized for better management.
To help company management, you will find a number of established consultant companies having qualified manpower whose help will soon be good for asset management. They can be quite effective to audit present practices and suggest best practices, problem solving and action plans. It might be well 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 would give better picture of whole operation of the enterprise. This can enable various key officials to provide their timely input to top management to be able to devise suitable plans. Like, government may emerge with special tax incentives for many industries to buy 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 take advantage of the government’s tax incentive for that business.
Lastly, it’s the assets of a company which enable the production and delivery of its goods and services. When fixed assets are being purchased or replaced a couple of important questions arise. What’s the price 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? Questions concerning the usage of the asset could be. What are the operating costs? How much skilled and unskilled manpower could be needed for operation? What are the training costs involved? What are the installation costs? What’s the useful life of the asset? Can it be the latest 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.