It’s a method or the process of developing, operating, maintaining, and selling of assets with high profits. This terms usually used in finance in reference to personal level or firms that manage assets on behalf of individuals or other entities.
It will keep track of their assets so that relevant stakeholders will know just what assets are available and when they should sell it to get maximum returns. When it comes to asset management, there are two main things that individuals are interested in knowing. One, what role does the asset management process play? and how can a firm develop a good asset management plan?
1.Role of the asset management process:
- It keeps tabs on all of its assets. This process makes it easy for an organization to keep track of their assets, no matter of current or non-current. Assets owners will know where its located, how they are being put to use, and if there are any changes made to assets. It can also recover the assets more efficiently which leading to higher returns.
- Guarantee the accuracy of amortization. Since assets are checked on a regular basis, it ensures that the financial statements associated with them are kept updated.
- Helps identify and manage risks. It will be always kept aware of identification and risk management that arises by using certain assets which means that firm will always be prepared to counter any risk that comes it’s way.
- Remove ghost asset from inventory. Ghost assets are those which are lost, damaged, or stolen assets and can no longer keep a record of such in books while the firm’s owner aware of it.
2.Good Asset Management Plan:
- Complete an Asset inventory: The owner needs to take count of all the assets that he owns which will determines the effective management. When preparing an inventory of company assets, the following should be included:
– Total count of assets
– Where the assets are
– The value of each asset
– When the assets were acquired
– The expected life cycle of the assets
- Compute the life-cycle cost: Life-cycle cost is the total cost throughout its life including planning, design, acquisition and support costs and any other costs directly attributable to owning or using the asset. Hence it’s important to keep a precise asset management plan to avoid any additional or unwanted cost.
- Set Levels of Service: Next step is to provide different types of services by outlining the overall quality, capacity, and role provided by the assets. In doing so, the firm’s owner can then determine the operating, maintenance, and renewal activities needed to keep the assets in good condition.
- Exercise Long-term Financial Planning: The asset management process that a firm owner adapts should easily translate into long-term financial plans. With a good financial plan in place, the owner can then assess which objectives are feasible, and which ones need to be prioritised.
3.Benefits of Asset Management
- Improving Acquisition and Use: By keeping track of the company’s assets throughout its life-cycle, a firm owner can improve its method of acquiring and using assets. The owner will able to determine what assets to acquire and able to use the asset at maximum extent.
- Improving Compliance: Government agencies, non-profit organisations, and companies are required to provide comprehensive reports on how they acquire, utilise, and dispose of assets. To ease the reporting process, a majority of them record their asset information in a central database. In such a way, when they need to compile the reports at the end of their financial year, they can easily access all the information they need.
Asset management is a system that aid companies to keep tabs on all of their assets like a vehicle, equipment, buildings or house, and investments. By doing so, it makes way easier for the owner for asset operations and disposal. This also helps to minimizes the chance of ghost assets and get the best return out of it.