Fixed Asset Management

Fixed Asset Management can be defined as the accounting process that keeps a track of financial accounting, maintains preventive measures, and deterring theft. Fixed assets can range from immovable assets like land, buildings, plants, to moveable machinery, computers, vehicles, furniture, and intangible assets like software and leaseholds.

When a business is small and confined to a small office, it is easier to keep track of fixed assets. Even then there can be troubles keeping in check technological equipment, vital software, and related assets. However, when business start to grow, fixed asset management starts to get harder as well. Proper asset management also means that equipment failures are avoided, downtime is reduced, and inventory loss is minimized. Assets’ lifetime value is also improved if they are kept under regular repair and maintenance, and that is also part of fixed asset management.

Fixed assets are the most critical part of any business, and usually cost the highest too apart from the day-to-day working capital. In most cases, they also make up for the highest proportion of any company’s net worth. Then there’s the added factor of low liquidity of most fixed assets, for instance cars and machinery are not easily sellable. Therefore it is highly imperative that not only investments in fixed assets are made after due diligence but once those investments are made fixed assets are also taken care of properly. The constant calculation and updating of depreciation to keep the asset’s value up to the market values is also important. All these small yet significant responsibilities are better left to experts because wrong calculations can lead to financial losses while re-investments or divestments.

For starters, fixed assets require massive capital investments. Sometimes they also require huge time investment for instance construction of a plant, or addition of elevators in a building or custom production line etc. The IBM sources say that global spending on IT hardware alone is expected to rise to reach $1.1 trillion by 2019. Rest of the fixed assets are on top of this then, considering how technology has taken over almost all businesses in the world.

There are a number of pitfalls that can be avoided if proper fixed asset management is carried out. These include equipment failures leading to unexpected downtime and halt in business operations, lost inventory or supplies, safety and security malfunctions due to machinery breakdowns, failure in keeping business operations compliant with regulatory requirements, inability to finish orders and delivery on time, and so on.

The result of these mistakes is not just production halts and angry customers. There can be a whole plethora of financial disasters like lost productivity, out of schedule repairs and maintenance, as well as fines and even legal penalties. For businesses that operate plants over higher temperatures a plant failure can lead to a halt of weeks and even months. The quality of products or services might also get affected leading to long term impacts for the business.

Through proper fixed assets management you get to keep track of your equipment, vehicles, machinery, and assess condition of the fixed assets. The process can be complicated and gets more complex as the business grows. In addition to all the problems mentioned above that you can easily avoid through proper fixed asset management, there are a few key advantages to be gained as well.

With proper tracking codes and simple technology like Radio Frequency Identification, you can keep your assets safe. This doesn’t have to be limited to the technical equipment, rather can be used for all moveable assets. Secondly, with asset management software installed one time, you can integrate all data from depreciation, repair and maintenance, disposal, renewal and so on. Safety and environment controls also become possible and easier with integrated software. Finally, if you have access to a higher version of technology, you can also incorporate sensors, and other IT devices to further secure your assets. This is especially important for companies that require specialized equipment and assets and which could define their unique selling point, such as shaving blade manufacturers.

Fixed assets themselves are a massive investment, and although they make for the direct contribution to your core business activities, their management and care can become a source of high financial leakage for any business, especially a growing one. Then the software and technical requirements that you might wish to have can fall out of your easy affordability, as do the human resources requirements to operate those software. This is why outsourcing companies that do fixed asset management as one of their core services can help you not only in making your assets more secure, efficient, and well taken care of, but they can do so at a much lower price than if you were to do all this yourself.