Asset management deals with technical matters, and ideal management practices. This procedure is very necessary because it is useful as a basis for making decisions in order to achieve general business goals.
From this asset management, a company can choose whether these acquired assets will be maintained until their useful life expires, increase their quantity, or replace them in order to increase production.
Definition of asset management
In general, asset management is a monitoring system that keeps everything of value to an organization. The thing of value is in the form of assets, both tangible and intangible.
Apart from unifying, asset management is also responsible for operating, maintaining and developing assets for the benefit of the organization. Meanwhile, assets that are considered as weaknesses of the organization must be set aside in order to maintain cost effectiveness.
Asset management goals
Designing asset management in general aims to assist companies in making the right decisions. With this right decision, companies can manage, maintain and use assets effectively and efficiently.
In setting asset management objectives, the entrepreneur and the management team need to look at different perspectives. The efficiency and effectiveness that can be achieved from this asset management can be judged from the success achieved.
Some of the other goals in asset management are:
- Ownership of the status of an asset so that it is not recognized by other parties.
- Inventory of assets and assets owned.
- Keeping the asset value high and having a long life.
- Minimize costs as long as the asset is still there or has not been damaged. Cost here is defined as the budget that must be incurred for damage, maintenance, or service.
- An asset can generate maximum profit.
- Achieve optimal use and utilization of assets.
- Safeguarding the assets of the company.
- Reference in preparing the balance sheet in the accounting books.
The function of asset management and its urgency in the company
Assets in accounting are assets owned by a company or entity. Every company, for example, must have at least one fixed asset, namely land or buildings to carry out production, even though the land or building is leased.
This asset is the most important part of the company that must be managed properly. Therefore, asset management becomes an important point in management. The following are some points that show the function and urgency of wealth management in a company.
To make it easier to understand the first point of the urgency of this management, let’s compare it to the vehicle assets we own. For example, we don’t want the after-sales value of the company’s car assets to drop because they are considered only used cars.
Although, electronic goods and vehicles must experience changes or depreciation, through proper asset management, for example keeping the car body smooth, the engine being maintained due to routine, and so on, the after sales of the company’s car will not fall.
Through asset management, companies can take some appropriate actions such as providing adequate operational costs. In addition, the company can also maintain the value of assets by owning more than one car so that it does not get damaged quickly due to continuous use. Or as a preventive measure, it can be taken into consideration in the decision to use vehicle insurance services, compared to the higher risk of harm.
Make budgeting easier
This second point is also very important because asset management makes it easier for companies to prepare financial plans. Several things that will be facilitated by this management are the preparation of funds for purchases, engine maintenance to vehicle operations, and other costs that must be recorded in the company’s accounting.
Checking the company’s cash balance is an easy way to find out the budget you have. However, without proper asset management, large cash in the company can be used for things that are not too important.
Without this asset management, companies are more likely to over-purchase items that end up not being used. For example a restaurant owner who buys too many groceries when he just opened a restaurant. Of course this has an impact on loss if the restaurant has not been visited by too many consumers.
Have risk management
Even if you own a business or invest, you must prepare risk management which is defined as a method of managing uncertainty including losses that may occur. From well-designed asset management, companies can reduce risk and increase the necessary control measures.
Asset management cycle
Good asset management or wealth management, applying the following eight stages, as below:
- Asset requirements planning
This is the earliest stage of wealth management activities. Its activity is to plan what needs are needed to support asset management, for example carrying out an inventory.
2. Asset procurement
Then carry out procurement activities for the goods needed by the organization, and how to get them.
3. Asset inventory
After that, the quality and quantity of the assets owned are identified, both physically and non-physically. Each asset is assigned an identity or code to make it easier to manage.
4. Legal asset audit
This conduct asset audits, both in terms of rights, ownership, transfer procedures, and others related to organizational regulations.
5. Operation and maintenance of assets
Assets owned can be used to support work and achieve organizational goals.
6. Asset valuation
Provide value to all organizational assets. The goal is to find out how much the company’s assets from an economic point of view.
7. Asset update
If there are assets that are judged to be ineffective for reuse, they need to be renewed.
8. Asset write-off
If the asset is completely unusable, then it can be deleted. This deletion does not mean that the goods are simply thrown away, but that they can be transferred to other parties by selling, auctioning, and donating.
Asset management system to increase efficiency
Whatever assets a company has, managing assets is one of the most challenging tasks. Especially if we have assets in large quantities and must also take care of sales to consumers. Of course this is a condition where business people need outside help to take care of it.
Understanding Asset Management and Its Purpose, Functions and Cycles
Actually, we can still take care of our assets with good management and it will have an impact on efficiency, including costs. However, we can apply this if the company’s assets that we have haven’t changed! Here are asset management tips to improve efficiency that may hopefully help us achieve our business goals.
1. Understand the life cycle of your assets
The first thing we must know and form the basis of asset management is to know the asset life cycle. For example, we are in the juice business and rely on a blender for operations. Well, we have to know or be able to estimate the life span of this blender so we can prepare a budget for servicing or buying a new one in case of damage.
These asset life cycle estimates or estimates also help us or our employees to use them more wisely. We also use this asset as well as possible so as not to get damaged quickly.
2. Choose the person in charge of the assets
At this second point, it can be said that we choose the right hand who is able to manage and maintain our assets so that they do not get damaged or shrink quickly. Why do you need a person in charge? As a businessman and an ordinary human being, of course we cannot 24 hours continuously monitor the assets and businesses we have.
In addition, the bigger a business means the more it has to be supervised, of course this cannot be done alone.
That’s why we need a person in charge of our valuable assets. We recommend that you choose a trustworthy and reliable employee for this position. Another tip for those whose businesses are starting to grow large is to set up a special team to manage these assets.
3. Knowing the depreciation of assets owned
Knowing the depreciation of assets owned by the company is one of the third important points! If we do not know the value of automatic depreciation, our asset management will not be perfect. Our business will also be affected.
Knowing depreciation means we know when this asset must be replaced because it is obsolete or can no longer support the company’s operations. That way, budget readiness is also easier to design.
4. Check the assets owned
This asset check must be carried out regularly and periodically because if it is not implemented the company will experience financial losses. The reason is, there are burdens from asset ownership such as paying taxes, insurance, purchasing, and maintaining assets.
For example, companies are burdened with tax payments for assets that have depreciated or no longer belong to us. For example, a car that has been sold but has not been renamed so that we are subject to double vehicle tax.
5. Using smart asset management solutions
Today’s sophisticated and digital era helps us in many ways, including managing assets. We no longer need to do asset management manually which takes a lot of time and effort. To be optimal, we can use software that automatically processes asset management.
As an option, software such as Project Management and Atlassian offer various conveniences such as asset monitoring, depreciation checking, service schedules, contract management, cost analysis, and so on. So it’s easier of course.
Efficiency and effectiveness are positive impacts of asset management implementation. For those who don’t want to be bothered and preoccupied with asset management matters, they can take advantage of such an application.