Asset management is a concern for businesses across the globe. This is because your assets are what drive your success forward. As business owners, we rely on both physical and financial assets to achieve our professional goals. The Purpose Of Money offers a few tips for women-owned businesses on asset management, including what it entails how to get started.
3 Types of Assets
Assets fall into three basic categories: physical, financial, and intellectual. Examples of your physical assets are inventory, real estate, and equipment. Financial assets include cash, stocks, bonds, and lines of credit. Intellectual assets are intangible but still highly valuable, such as proprietary software or manufacturing processes. In this article, we’ll focus on tangible assets.
What Does Asset Management Really Mean?
Asset management is a process. It involves knowing what you have, what it’s worth, how to keep it going, and, how and when to dispose of these resources. For example, an older embroidery machine could be more expensive to repair than to replace. In this example, you understand the value of the machine, including its resale value and the money it can make you over the next few years. You also know what maintenance is required to keep it up and running. Most importantly, you know your asset well enough to decide that it’s time to let it go in favor of a new asset. In this scenario, a newer embroidery machine will add more value to your organization. A key component of asset management is understanding the asset lifecycle.
How to Start Asset Management
Get organized before you begin a full-fledged asset management plan. After all, you can’t manage what you don’t know you have, and you may not fully understand the scope of your property if you aren’t organized.
A good first step is to conduct an inventory audit. Many steps involved in the audit process. Therefore, you may have to pause your operation and physically counting inventory. Inventory is easier when you use barcodes and scanners.
You’ll also need to analyze freight costs and match invoices to outgoing shipments. Here’s a quick tip. Label your equipment. A simple sticker will help everyone within your organization quickly and effectively know the state of each piece of equipment. It will also help you keep track of each piece since you can use labels to group equipment and inventory.
Make sure your employees are organized too. This is especially important if you have multiple shifts that come in and out of your business at different hours. Shift scheduling software, such as QuickBooks Time, helps you keep up with where everyone is in your proverbial pipeline and offers easy repeated scheduling of employee hours and times. Using an online platform means you can handle employee scheduling from anywhere while keeping up with your records and staying compliant with local and federal labor laws.
In addition to your inventory and employees, you’ll also need to know what you own and how much money you have currently in the bank. Remember to take note of payments expected in the next 90 days.
Potential Asset Management Challenges
Asset management is a series of continually moving parts. Unfortunately, this also means lots of opportunities to stall the process. A few common pain points you might encounter in your quest to stay accountable include:
- Poor management. If you are not personally responsible for key areas of your business, you must pay close attention to the effectiveness of your management staff.
- Lack of structure. Failure to implement a structured asset management process or have complete standard operating procedures and a non-negotiable timeline, is a recipe for disaster.
- Management without authority. Even if you’ve enacted asset management policies, if your management team has not been given clear authority to enforce these policies, they cannot effectively manage your assets.
- Manual data entry. Human errors are commonplace. As it pertains to your asset management, rushing too quickly, fatigue and lack of training can all result in data entry errors. Even something as simple as an inverse number (e.g. 17 instead of 71) can harm your asset management procedures.
Asset Management Best Practices
To manage assets most effectively, it’s best to use a systematic approach. By creating solid processes, you will improve companywide productivity and efficiency. This will ultimately lead to greater returns and lower overhead. A few asset management practices to include in your process are:
- Automate asset reporting, data collection, and other tasks that do not require immediate human attention.
- Learn how to be predictive instead of reactive when it comes to asset maintenance. In other words, maintain, don’t fix.
- Update your asset value/replacement cost list each year. This will help you account for depreciation. You can use a template to make it easier.
- Create an asset register. This is a detailed list of all available assets.
How To Improve Your Asset Management Plan
Remember, there is always room for improvement. One of the best things you can do is to understand why each individual asset exists. You might even assign a rating to each that outlines how important it is to your overall operation. This way, there is no doubt of what requires attention first if multiple assets fail or need replacing at once.
On an annual basis, evaulate how effectively each component of your business is running. Next, create a timeline for asset disposal or replacement. Make it easier to budget for replacement costs so that you are not hit with a surprise unexpected bill at the end of an item’s lifecycle.
Managing and maintaining your business’s physical assets is one of the most important things you can do as a small business owner. It’s a step closer to being in full control so that you can make more informed decisions to benefit your business.
Use these tips to start your business’s successful asset management. Don’t worry. It may be overwhelming at first, but you’ll get the hang of it, and you’ll be glad you did.