If you’re running a business, you already know how many different tasks are required to keep things afloat. Asset management is just one of the many elements required to run a thriving business, but it isn’t talked about often. The following aims to remedy that by exploring what asset management is and why it’s important for your business.
What Are Assets?
Assets are anything that is valuable in the present or will contain an economic value in the future. Basically, assets are anything that can be converted into cash. People, governments, and businesses own assets. Assets can generate revenue, but do not need to be generating revenue to be considered an asset. Personal assets include things like your home and personal investments.
Business assets can include machines, raw materials, inventory, property, patents, royalties, and other intellectual property. A balance sheet is often used by a company to list its assets and detail how those assets are financed. There are two kinds of assets businesses need to know about.
Your current assets are things that can be converted into cash within a fiscal year. Common current assets include cash, equity that is liquid, money owed by customers that will be paid in the short term, and inventory.
Your fixed assets are long-term assets. These are typically listed on your balance sheet as property, plant, and equipment (PP&E). You might have intangible fixed assets like licenses, brand names, and copyrights. You might also have things like vehicles (not all vehicles are assets, but some are), office furniture, land, machinery, and buildings. Fixed assets are things that cannot be turned into cash for short-term expenses or investments.
What Is Asset Management?
When it comes to business, asset management is the process of managing your company’s money. The work gravitates around identifying your financial goals and then managing your portfolio in such a way that you can reach those goals. Regular financial check-ins are often required for optimal results.
What Is An Asset Manager?
Given the complexity of managing all of the assets that a person or a company owns, some people prefer to seek out professional guidance and help. An asset manager is someone who manages assets on behalf of a client, whether that be a person or a company. This position goes by many names, including investment advisor, wealth manager, financial advisor, and institutional wealth manager, just to name a few. Companies that manage assets for other people or businesses tend to have an Asset Management Company (AMC) structure, which they use to manage a client’s assets. If you’re looking for help with asset management, speak to providers about the structures they recommend for your situation.
Select Someone To Handle Assets
Whether you hire an out-of-house provider or designate the role of asset management to someone within your company, you still need to make it clear who is handling the management of assets. It should be someone trustworthy and reliable and perhaps even a team of people depending on what you have to manage.
Study Your Asset Life Cycles
Every asset you have has a life cycle. This cycle begins when the asset is purchased and ends when the asset is disposed of. Having a sense of how long you’re going to be using each asset can help you better understand asset maintenance. It also allows you to make wiser purchases if you have the long-term in mind.
Routine Tracking Of Your Assets
If you’re not regularly tracking your assets, you’re putting your business at risk of financial loss. You might get charged with paying insurance or taxes on unnecessary assets or paying for maintenance, or repurchasing assets you don’t need. In some cases, you can even end up paying taxes for assets that have depreciated or been disposed of. If you have an inventory-based business, asset tracking will also help you keep the right amount of inventory for client happiness and your financial well-being.
Study How Assets Depreciate
Some assets lose value over time. Vehicles are a particularly poignant example. In most cases, once a standard vehicle has been purchased, it loses about half of its value. The more miles on it, the lower its value is. If you have a product or inventory that expires, that’s also a prime example of depreciating assets. Pay attention to what is depreciating and at what rates. This can help you determine when to sell things and when to dispose of things.
The above information should have outlined how important asset management is for businesses, both large and small. All of these processes are ongoing, whether you’re paying attention to them or not, but if you are watching, you can make good choices that positively impact your business.