What is asset management?
Assets are invaluable in all walks of life.
Assets are especially essential parts of the business equation. Although the concept of an asset is broad, it refers to anything that can be controlled and used to either store or produce more value. These include the physical and intangible assets that your company owns.
Tangible assets are physical items such as machines, tools, real estate, vehicles, and more. In addition, intangible assets include intellectual property (IP), databases, operational data, software license agreements, and organisational capital. These assets have a finite value.
The idea of spending time and money on protecting assets that don’t generate any revenue may seem like an inefficient use of resources. But as soon as a business grows and scales, the importance of asset management increases proportionally, and ignoring your company’s assets can turn into a financial nightmare.
When properly managed, assets can contribute to your company’s growth, financial success, and encourage sustainability. However, poor management practices can hurt your bottom line and potentially hinder or even destroy growth opportunities.
Asset management ensures that your company can continue to grow and expand with the correct use of assets. It will help keep your business on track, manage risk, and more.
The concept of asset management isn’t new or revolutionary, but it has powerful and important applications for businesses. When executed correctly, asset management solves the most pressing concerns plaguing an organisation, allowing it to grow more efficiently.
Asset management is a key part of an effective business management strategy. Unfortunately, it’s often overlooked as a mundane task that’s not very exciting. However, this perception is wrong. Asset management is a critical component of any profitable business, and it provides value to both the organisation and its shareholders.
Asset management involves people from all business areas and divisions, from COOs and managers to auditors and engineers, and even IT specialists and equipment operators.
Why is asset management important?
Businesses that invest in asset management reap various benefits. Not all of these benefits are linked to financial gains. Real-time asset tracking produces a constant stream of data, fosters responsibility, and keeps planning and equipment maintenance on track with the help of a suitable asset management system.
Tracking the assets (such as fixed assets) with the help of an with the help of asset tracking software eliminates some of the drawbacks of older monitoring systems, such as depending on erroneous data and having no means of knowing where assets are or how they function. In addition, asset management provides businesses a 360-degree view of the entire life cycle of the assets.
Asset management software also automatically save time and resources. Furthermore, enhanced scheduling and automated warnings reduce capital expenditures and save money on maintenance. Thus, total operational expenses decrease while planning efficiency improves.
Such a system facilitates the adoption of a risk management strategy and enhances regulatory compliance. In addition, the accuracy of depreciation rates and asset valuation is also improved.
What is an asset manager?
An asset manager is someone who manages a specific group of assets. The asset manager’s goal is simple: to save money through tracking assets and bring more organisation to reduce waste. An asset manager is responsible for developing and executing an asset management strategy, ultimately managing the assets entrusted to them.
Traditionally, businesses have outsourced asset management to asset management companies who act as fiduciaries. However, there has been a slow and steady shift toward in-house asset management with the help of asset managers.
Asset managers employ researchers and analysts responsible for tracking asset performance, providing sound investment advice, and taking care of other tasks that could affect the performance of the assets. In particular, asset managers look for high-growth investment opportunities before anyone else.
Asset managers should know various departments: administration, finance, capital, operations, and have a thorough understanding of a business’ stakeholders and strategic and operational procedures.
What is asset management software?
Asset management software is a tool that helps businesses make their revenue-generating assets more usable. Particularly those assets crucial to the daily operations of any business.
Asset management software gives a comprehensive perspective of an asset’s lifespan, from acquisition to deployment to maintenance and disposal. While an organisation might track its assets with a basic spreadsheet, asset management tools allow users to evaluate data relevant to each asset, helping them to make more informed decisions about asset management.
Asset management systems accomplish this by guiding users to keep track of assets, analyse maintenance fees, and extend an asset’s useful lifespan. Asset management systems record every detail of an asset and are highly beneficial to an organisation. In addition to tracking assets, they may also perform additional services such as:
- Decrease the expenses related to procurement, compliance, and maintenance of assets
- Improve the visibility of all assets
- Maximize the usable life of assets
- Enhance and guarantee compliance
An ideal asset management system will give users the resources they need to manage their complete asset inventory in a single, centralised dashboard. Asset managers can see where the assets are housed, who’s utilising them, and how.
What is the asset lifecycle?
The number of phases that a business’ asset goes through during its operating life cycle is known as the asset lifecycle. It’s a strategic and analytical process during which a company can successfully and productively use an asset to achieve its business objectives.
An asset life cycle is divided into numerous stages and generally encompasses all phases of an asset’s life (from acquisition to maintenance and disposal). Thus, each asset has a life cycle that may be broken down into four distinct stages:
The initial stage of the asset life cycle is planning. The asset needs are established and verified at this level. Determining asset requirements depends on a review of current assets and their ability to satisfy customer service demands.
Based on the business and industry standards, the requirements may be combined to produce a hybrid asset precisely suited to an organisation’s needs. Unfortunately, it’s also the stage where many errors can occur.
If something is set up incorrectly or a computation error is made, it can impact all subsequent phases until the asset is renewed or disposed of, which can take years.
When an organisation implements excellent planning at all stages of the asset management cycle, it can:
- Identify over-performing assets and under-performing assets
- Determine if existing assets are sufficient for business needs
- Ensure that assets are well-maintained and accountable
- Discover asset information for in-house assets
- Ensure that assets are accessible when they are needed
- Analyse different asset choices based on financial planning
A business can choose the best asset only after it identifies the cost and needs of all the available options. Acquisition planning encompasses all of the processes involved in purchasing an asset to achieve a cost-effective acquisition. This includes tasks such as asset design and procurement. The proper execution of these tasks ensures that the asset is fit to use.
An organisation must first determine if the asset will be purchased or built in-house. The next step is to create a budget for asset acquisition and a timeline for purchase. Finally, a realistic budget and cash flow should be designated as deficit funds; otherwise, project management may jeopardise the asset purchase process.
When the above criteria are satisfied, a project team should oversee the process to ensure that all acquisition process tasks are performed to achieve corporate service delivery and other asset investment objectives.
3. Operation and maintenance
The operation and maintenance stage is perhaps the longest stage in asset lifecycle management. It describes how an asset is used and managed, including maintenance, to provide continuous services. Therefore, asset managers should prioritise asset maintenance concerns in their asset management strategy.
For example, long-lived physical assets such as roads and buildings, need specific upkeep throughout their lifespan. Similarly, financial services such as portfolio management need regular upgrades for a positive outcome. Thus, the primary goal of this stage is to maximize asset utilisation.
During this period, you should focus on a specific asset for proper maintenance, monitoring, and potential enhancement to avoid operational changes. Upgrades, patch repairs, new license purchases, compliance audits, and cost-benefit assessments are all parts of operation and maintenance.
When an asset approaches the end of its useful lifespan, it can be regarded as a surplus or an underperforming asset. The renewal or disposal of an asset is the final stage of its lifespan. If an asset is to be disposed of, teams should carefully change the maintenance plan to ensure that mandatory maintenance is performed.
All assets will generate enough data to help firms choose the optimal course of action. However, this information is rarely gathered in a fashion that can help executives or managers make the right decisions. Therefore, an organisation should be aware of these essential steps well in advance of the renewal or disposal stages to use the data appropriately.
Types of asset management
It’s crucial to have a thorough awareness of all essential assets in your workplace. Especially those necessary for wealth management and creation.
For example, a gelato shop owner would collect information on managing their most valuable asset: the refrigerator. An IT asset manager, on the other hand, would keep track of their company’s software license compliance to avoid penalties and breaches.
Understanding the different forms of asset management is crucial in selecting a solution that’ll work for you. Here are a few different types of asset management based on their industry sector.
Financial asset management
Financial asset management, often referred to as investment management, is the financial services sector that manages investment funds and segregated customer accounts. While there are other types of asset management based on industry sectors, the term asset management is most commonly used in the financial services industry.
Accounting software helps corporations, governments, and individuals deal with asset management efficiently and adequately. Financial asset management employs specialists to manage funds and customer investments.
There are three primary financial asset management services users- corporations, high-net-worth individuals (HNWI), and financial intermediaries. Each group is interested in asset management for the same reason: to make a significant amount of money by using the money available to invest.
As a result, asset management companies typically charge minimum annual fees (some in the range of $5,000 to $10,000; a select few in the range of $100,000 to $1 million) to weed out smaller investors who may end up costing them in trading and transaction fees.
But recently, asset management companies have created pooled asset structures like mutual funds, index funds, and exchange-traded funds (ETFs). These are designed for set-it-and-forget-it investors with fewer assets (at least when compared to the wealth these companies typically deal with).
Enterprise asset management
Enterprise asset management (EAM) is a set of processes to control and measure asset performance to extend the useful life of an asset. It’s a solution that helps asset-heavy companies focus on asset management, upkeep, condition and efficiency, from its acquisition to its disposal.
EAM software assists the management of an organisation’s assets. Sometimes an asset registry and a computerised maintenance management system (CMMS) are often included in an EAM system. In addition, geographically spread, interlinked, or networked assets are frequently represented using geographic information systems (GIS). The use of a GIS-centric asset registry improves data integrity and interoperability, allowing users to reuse, synchronise, and exchange information more efficiently and effectively.
Some of the features of an EAM system are:
- Asset reporting and analytics
- Management of asset purchase and procurement
- Supply chain and MRO management
- Asset tracking and management
- Maintenance planning and scheduling
- Management of labor and inventory
Infrastructure asset management
Infrastructure asset management is a broad approach to maintaining physical assets such as water treatment plants, sewer lines, roads, bridges, and transportation. Large corporations like construction corporations and government agencies often use infrastructure asset management to manage important physical assets. The process usually focuses on the final stages of a facility’s life cycle, such as maintenance, rehabilitation, and replacement.
Even if a company’s infrastructure assets are tangible, these assets still need to be closely monitored, tracked, and managed using the right infrastructure asset management software. This ensures proper preventative maintenance and helps collect critical analytical data that businesses can utilise to make data-driven decisions.
IT Asset Management
IT asset management (ITAM) is a collection of business processes for integrating IT assets across the organisation. It combines financial, inventory, contractual, and risk management duties to manage the entire lifecycle of IT assets such as software and hardware.
ITAM software provides granular visibility for all IT assets by offering an in-depth perspective of a business’ IT environment. This becomes critical when defining and controlling a company’s IT infrastructure from the ground up.
ITAM software allows businesses to create an IT asset registry that manages assets such as:
- Software applications
- Cloud applications
- Desktops and workstations
- Servers and routers
- Smartphones, mobile phones, and tablets
ITAM tools provide precise information about the assets affected by a disaster or change. This helps teams with IT service management (ITSM) activities. ITAM systems also reduce unnecessary IT expenditures by maximising asset use and limiting IT asset acquisitions.
Digital asset management
Digital asset management (DAM) is a continuously growing sector that helps businesses manage their digital assets (digital media and content) in a logical, organised, and accessible way.
DAM software provides a cost-effective method to control access to digital assets. The goal of a DAM system is to provide structure to the workflow and lifecycle of a business’ digital assets, including videos, images, audio files, design files, and presentations. Thus, it is often used as a brand management tool to ensure that internal teams are adhering to brand guidelines and maintaining brand consistency.
It also provides several security and efficiency benefits. Using a DAM, businesses can control access to their digital assets, providing varying levels of access to content based on predetermined but fluctuating roles. DAMs also boost efficiency by reducing the costs associated with locating or recreating assets. These systems allow for secure storage and organisation of media files, as well as keeping track of asset versioning.
Some of the features of a DAM system are:
- Storage and organisation of different file types
- Access management for all files
- Metadata assignment for all files
- Version control to keep track of incrementally changing versions of the same asset
Software asset management
Software asset management (SAM) is a set of business practices used to manage the purchase and use of software. Unlike ITAM, SAM is responsible for software usage by tracking cost, deployment, software licenses, and license compliance for all end-users involved.
SAM software manages only software assets and not the management of IT hardware such as workstations and servers.
SAM software help businesses:
- Maintain compliance and prevent unanticipated software compliance expenses
- Manage SaaS and software licenses
- Track and monitor software spend through a single point
Challenges of asset management
Asset management is a valuable and important aspect of any modern business process. Asset management ensures that all assets are properly procured, operated, and managed according to industry standards and specifications.
It’s crucial to ensure that asset management is well organised at every phase of a project from conception to completion. Executives responsible for managing, safeguarding, tracking, or simply monitoring assets encounter a number of challenges.
- Selecting the appropriate assets: Most business executives aren’t aware of their organisational infrastructure. Deciding what assets to procure becomes more complex in such scenarios. Asset procurement teams wind up spending money on new assets without fully understanding their need. You can only make educated judgments about purchasing new equipment and software if you know what assets you have, who else has it, what’s in use, and how old or expired existing assets are.
- Procurement of uncontrolled assets: A conventional procurement-focused asset strategy is often responsible for introducing more uncontrolled assets into the organisation. In IT, such assets are termed shadow assets, which are implemented within a company without the authority of the IT department. This can introduce uncontrolled assets into the company, increasing expenses and security and compliance issues.
- Cross-functional assets: Managing assets across all business units is a major challenge for efficient operations. This is because business units want to use assets to make sense to their business, and generally disregard other units’ needs. The problem is that assets are often borrowed or shared by multiple business units, thus increasing the risk of business interruption when an asset is needed by more than one unit but is currently being used by another.
Benefits of asset management
Assets are important. They are valuable resources that a company needs to run smoothly. Asset management guarantees that the right people have access to assets at all times and that no unnecessary damage occurs.
When you choose asset management, you’re choosing to make your assets work harder for you. There are several benefits of using asset management to assure cost-effective procedures and maximum return on investment (ROI) for all of your organisational assets.
- Increased efficiency of all organisational operations: Once an asset management system is implemented, businesses can begin to comprehend the purpose of each asset. This covers their capabilities, management, and disposal to reduce expenses.
- All information in one place: Most asset management software include comprehensive reporting features. This helps businesses get whatever information they want from a single dashboard. Ad-hoc reports tailored to specific needs and basic reporting are easily accessed or promptly prepared and always up-to-date.
- Improved asset reliability: Asset management and tracking enhance the trustworthiness of assets. This allows asset managers to monitor maintenance cycles, analyse expenses, and review asset availability.
- Reduced maintenance cost: When an automated asset management system is in place, organisations often discover that the high maintenance price decreases. A solid preventive maintenance strategy is required for critical assets. Pesky ghost assets usually lost in the spreadsheet registry can be easily found and managed with an asset management strategy.
Keep calm and manage your assets
Asset management is a critical component of an organisation’s success. All businesses need to identify and analyse the various asset classes that make up their business. While executives can do this on a global and aggregate level, using specialized software is the most efficient way to ensure that the asset management process is done effectively.
Software designed for asset management can provide the organisation with valuable insight into the assets with the potential to generate the greatest return on investment. In addition, businesses can use asset management software to make asset-class level allocations to ensure that the highest possible return is achieved from each asset class.