The concept of asset management is similar to wealth management. It involves developing and managing all the aspects related to an asset in a systematic manner. Managers in this trade perform different functions, including operational, maintenance and selling of assets at the industry’s best prices.
However, since it requires extensive experience, various companies or independent business professionals hire asset management agencies to manage their assets. Let’s see why asset management is a crucial aspect for companies.
What is the Importance of an Asset Management System?
Several businesses across the globe are focusing on asset management as implementing it in an effective manner offers outstanding returns to their stakeholders. Moreover, the availability of a plethora of fixed and liquid assets makes it quintessential to possess a clear understanding of their importance.
Better Tracking of Assets
An Asset Management Company (AMC) manages the funds of companies or individuals by making timely and effective decisions to expand their finances or portfolio. One of the primary functions of an AMC is to track all the assets of companies or individuals. It allows a company to know the whereabouts of assets, how they are used, and whether they have undergone any changes.
Ensuring Accurate Amortisation Rates
With the help of an asset management system, financial solution providers ensure that the amortisation rate is correct. This is done during the periodic assessments of these assets, which keep track of all financial accounting books.
Better Control Over Risks
Another asset management function involves identifying and better managing assets by allocating available risk factors during the different phases of the assets life cycle. To be more precise, risk management is associated with an asset’s usage and ownership phase. A financial solution provider helps to incorporate a risk management plan by locating the possible risks.
Removal of Ghost Assets
There can be situations where activities like loss, damage and theft in relation to assets can be present. These are also mentioned in the current books of account. Hence, by implementing a routine asset management plan, a business can find any ghost assets and remove them from the financial books for accuracy.
Reduction in Asset Loss
An asset management system helps identify any assets lost during the operational or assets recovery stage. This will help maximise a stakeholder’s return and help maintain the goodwill of the company.
Manage Assets from Different Locations
One of the significances of a better asset management system is that companies can manage from different locations. For this, a financial analyst generally uses authorised asset management software. It ensures that this operation is carried out seamlessly at every level of management and department.
Here, it can be challenging to maintain invoices to provide in the software. In that case, RazorpayX can help create, issue and track invoices by maintaining GST compliance required at different management levels from any location.
A systematic asset management program offered by financial solution providers can lower maintenance costs to a great extent. Generally, a company incur substantial maintenance costs during an asset’s operational life cycle phase. Therefore, maintaining and managing assets in prior hands will allow the business to incur fewer expenses and gain more profits.
Some companies offer online solutions through different digital asset management platforms, which make the entire implementation process hassle-free. However, developing an effective asset management plan requires a strategic thought process and a better understanding of a client’s business model.
How to Develop an Effective Asset Management Plan?
The strategic planning of asset management is done for both fixed and liquid assets involved in public and private enterprises. Hence, here are the necessary areas that an individual needs to focus on while developing an effective asset management plan:
Step 1: Assessment of Asset Inventory
The assessment of asset inventory involves understanding the nature of assets that a business owns. This step is primary and pivotal, as before managing assets well, it is essential to know the exact number of an asset in their possession. So, while assessing the inventory, the financial management company must consider the following factors:
- An exact number of assets
- Location of these assets
- Valuation of each asset
- Date and time when an asset has been procured
- Expected asset’s life cycle
Keeping a record of all this information will help the management company plan the assets seamlessly.
Step 2: Evaluation of Asset Life-Cycle Costs
The precision in the asset management reports comes with the accurate calculation of the asset’s life cycle. This helps in understanding the cost of each asset at every stage. Moreover, hiring an asset management firm will allow the business to get the correct report on initial purchase costs.
Evaluating the life-cycle of assets helps to locate the additional costs like maintenance and transportation costs in the case of movable assets. Furthermore, the asset management agent checks all the invoices and GST details during the procurement and processing phase.
If businesses are looking for ways to generate hassle-free GST-compliant payable invoices, RazorpayX can help such businesses access a wide range of benefits. Using this platform, one can create seamless GST-based invoices and send notifications to other parties through SMS or emails.
Step 3: Set the Service Parameters
In this step, the asset management agency tries to assess the overall capacity and quality of the asset. Also, they can know how each of these assets functions. This process helps the business understand the performance level of the assets and the costs required for operating and maintaining the same.
Step 4: Make the Long-Term Financial Planning
In this final stage, the Business and Asset Management Company will make long-term financial plans. This will restore better procurement, increase returns and help create a great investment portfolio.
From the above information, we can understand that asset management is necessary for companies dealing in real estate, manufacturing, exporting and importing. Effective asset management helps the business strengthen its clients’ portfolios.
- RazorpayX allows business owners to open current accounts, pay taxes, schedule payments, pay vendors seamlessly and check invoices from a single dashboard. This saves valuable time and effort.
- It fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.
- With RazorpayX Payroll, businesses can automate salary payments and provide insurance policies to their employees.
Frequently Asked Questions
What is asset recovery?
Asset recovery involves increasing the value of assets that are not in use or at the end-of-life stage. This involves strategic reuse or incorporating divestment strategies to recover assets. Also, asset recovery mainly occurs for corporate-owned IT assets like desktops, laptops, tablets, etc.
What are the different stages in the asset life cycle?
The different stages of the asset life cycle include procurement, deployment, utilisation, maintenance, and disposal. This asset's life cycle starts with depreciation adjustments and other maintenance costs.
What are the various functional roles in asset management?
A reputed asset management firm hires a handful of key individuals to perform different functions needed to manage assets on behalf of companies. This includes financial analysts, economists, asset managers, and asset evaluators.
Discuss the role of asset management firms
An asset management firm can perform many vital roles, primarily managing funds for companies and individual professionals, making beneficial investment decisions, and initiating the asset recovery process.
What are the benefits of asset management?
Some of the benefits of asset management include making better financial decisions for the future, staying up-to-date with regulations and compliances, maintenance of equipment, etc.