Fixed Asset Management is the term you must have heard of in your business, irrespective of its industry. You must also be well aware of the end of the financial year, but maybe you are still clueless about the actual worth of your business.
Fixed Asset Management plays an important role in your business, it directly affects the supporting of future planning and vision for the organization. Not only this but with proper planning and data-driven information, your business can lead to effective decision-making to enhance the outcome.
What are Fixed Assets?
Fixed assets are also known as tangible assets or property, plant, and equipment (PP&E). In terms of accounting, fixed assets are the assets and property that can be easily converted into cash.
Fixed assets can be defined as a long-term tangible part of a property or equipment that an organization owns and uses its operation to generate income.
It is anticipated that the fixed assets cannot be consumed or converted into income within a year.
These fixed assets basically appear on the balance sheet as property, plant, and equipment (PP&E).
What are the examples of Fixed Assets?
Here are a few examples of Fixed Assets:
- Office equipment
- Computer equipment
- Manufacturing equipment
Basically, these assets depreciate over their useful life.
What is Fixed Asset Management?
According to Business Dictionary,
“Fixed Asset Management is the management of fixed assets that cannot be converted to a fair cash value in a timely manner. Fixed assets are often managed through the use of asset tags, which are tracked through serial numbers or bar codes, for easier organization, and are filed for the purpose of accounting, maintenance, and theft deterrence.”
In simpler words, it is the process of tracking and maintaining the organization's physical equipment and assets. They can be managed by asset tagging or barcoding. The main reason for implementing fixed asset management is asset maintenance, asset tracking & preventing losses.
With the fixed asset management system, an organization can do the following:
- Track and Monitor fixed assets
- Overlook equipment and machinery at multiple locations
- Low maintenance costs
- Improves operational efficiency
- Maintain a record of retired, sold, stolen or lost assets
Fixed Asset Management allows an organization to monitor equipment and vehicles, to assess their location, and to keep them in good working order.
This also helps to minimize lost inventory, equipment failures, and downtime, thus, improving the overall value of an asset.
Fixed Asset Management is a comprehensive term that describes the origin of the process of managing an organization's assets in every aspect (from the time it is acquired to its disposal).
It also keeps detailed asset records of an organization's valuable property. The information it records are as follows:
- Purchasing Details
- Maintenance Schedules
- Pattern of Use
The asset management software incorporated with a fixed asset management process assists to improve visibility and control over assets.
Why is Fixed Asset Management important?
Here are the few reasons why Fixed Asset Management is important:
Optimization of Assets
Precise asset management can assist you in optimizing your daily action & operation that involves the planning, resources use, and in the executing management program.
Extending the life cycle
Every asset requires support service, in case if not given can result in a tremendous expense. The asset management keeps check on all such information and assures that assets are accurately managed, thus prolonging their lifecycle and optimizing your property. It is very effective in monitoring & managing the asset.
Saving Money on Maintenance
At the operational stage of the life cycle of an asset, a business firm can confront several maintenance issues. Maintenance issues can cut into the benefits of the organization. Then again, under-maintenance can prompt diminished efficiency. So, maintenance should be done on a regular basis.
Removing Ghosts Assets
These assets will be expelled from books that before were mistakenly recorded, tempering the inventory records. In this way, Fixed Asset Management can be beneficial in monitoring the assets as well as in asset recovery.
Ways through which Fixed Asset Management is practiced:
There are many ways through which fixed asset management can be practiced. Few of them are as follows:
Accountability and Safe custody of Assets:
One of the most important functions of fixed asset management is the safe custody of assets. This safety of assets is accomplished through an assigned responsible person.
Accountability of assets is done to increase the level of security and reduction of theft incidents or misuse of assets, otherwise, they reduce the bottom line as well as cash flows.
Also, good risk management measures include the maintenance of high standards of data integrity and custody of ownership documents.
Fixed Asset Tracking:
Some organizations have a large number of assets, movable assets in focus need to be tracked in order to keep them safe and productive.
It helps to manage data and asset information up to date by tracking assets location, usage, assigned person, maintenance, insurance, etc. And assists the associated managers in maintaining, the asset's safety, productivity, and efficiency.
Asset Lifecycle Management:
Asset lifecycle management is a process of controlling, monitoring, and accounting of assets throughout their life. And keeping track and record of every detail and every action was taken on the asset by any user from its acquisition date to its disposal, alongside saving the data as history.
Therefore, fixed asset management helps to improve asset lifecycle planning, monitoring of asset utilization, planning its maintenance along with its replacement if required any.
Keeping the track of warranty, annual maintenance contracts, and related insurance reduces the risk of undue cost because of mismanagement.
The practice of asset tagging gives you effective and appropriate management and control of assets in terms of asset's long run.
Asset tracking is done easily with the asset tagging of fixed assets with unique identification codes example, barcodes, QR codes, RFID, NFC, etc.
This asset labeling also boosts up the physical audit process by identifying assets on the floor with asset tags.
Conducting Physical Asset Verification:
Periodic physical asset verification is done to ensure the existence of assets. Physical verification would reach for reconciliation of the results with asset records in the record books.
Physical asset verification helps in identifying ghost assets. The ghost asset is one that is lost, stolen, or unusable, yet it is recorded as a functioning asset. Assets that physically exist but not mentioned in books, can also create a problem.
Fixed asset management is capable of the asset acquisition and control process that requires necessary attention and correction for safeguarding assets.
Fixed Asset management software is important for any business as it directly affects the future planning and vision of the organization.
This is done by proper planning and data-driven information which helps in effective decision-making to enhance the outcome of a business.