Knowing which assets you own, and where they are will affect your bottom line
Knowing which assets you own, and where they are will affect your bottom line.
When a company prepare financial statements, there is a mad dash to correctly asses all the assets and confirm the liabilities. It is not uncommon for businesses to only focus on these areas periodically, but it most certainly not a good idea to neglect them too much.As liabilities mostly in some form require a repayment, companies tend to focus on them a bit more, so what is left behind? Assets.
The assets of a company is one of the big numbers on the balance sheet and should be managed in line with their importance. This number could determine the longevity and continuing existence of a company. Then why are we not managing it better?
This is a hard question to face and it is something that we need to consider more in our day to day tasks.
Lets look at cost saving as an immediate impact area of good asset management.
If you know what assets you have, what their values are, and how long they will last in your environment, it is simpler to determine what the insurance cover must be. To many businesses are over/under insured as they do not actually know which of their assets are still being used, and which have been re-allocated to a junk pile. This is a harsh reality check for a financial manager to find out they have been overpaying for insurance for a long time, which is wasted money.
Then take replacement costs as an example. As a typical office bound company can decide that “Our employees need new laptops this year, their old laptops are to old” In some cases this true, but how many times do we really investigate and ask: “Is it the equipment that is old and has the employees software changed so much that the laptop cant keep up? Or is the laptop slow because of all the additional load being placed on it by apps and social games loaded by the employee that has no business being there?” If an employer can save on replacing one laptop each month, they can employ a new employee on that cost saving alone.
Then lets take a look at simple effects of having a misconception of the asset value in a company.
Financing and gearing relies heavily on financials of a company and the asset value is an integral part of this. There are instances where I have done an asset verification, and the existing “asset register” is so far from the truth, it reads closer to a book of fiction. Having “keyboards” and “lightbulbs” on the asset register may sound ludicrous, but multiply that by the number of employees and take that effect over five years and suddenly, it becomes a problem. Now we have to consider the scenario where you secured finance based on the figures, and now they are wrong, what is the impact on your reputation?
And what would the impact have been if your assets are currently undervalued, could you have secured a better rate?
So how do we address these problems? Can we address them? Yes, we can. The biggest challenges for financial managers are that they don’t have the information in a simple to consume format. We can only rely on financial figures if our financial solution provides us with accurate information. This can be achieved with a two pronged approach. Have a solution that manages the verification process and allows users to do their verification rapidly and accurately. Have a asset module that gives accurate reports on financial data as well as projected values to assist with longevity planning on assets.
Having these solutions and managing the assets better will allow for better planning and accurate reporting.