Asset Management 101

Asset management is the method that a company uses to track fixed assets. It is the process of controlling assets throughout their lifecycle - from procurement, through daily operations, and finally disposal. Factory equipment, desks, chairs, computers, and property are some examples of such assets. Broadly speaking, asset management involves tracking the physical location of assets, managing demand for scarce resources, and accounting tasks such as amortization. Issues that are part of asset management include asset value and depreciation; purchasing requests, orders, and asset receipts; licenses, leases, maintenance, and other contracts; vendor performance, service levels, and warranties; departmental and user data; and physical asset attributes. One of the purposes of going all these lengths and putting in effort to organize all this information is to keep track of important information such as how much the asset costs, whom it was purchased from, who is using it, where it is physically located, which department code the cost should be assigned to, which vendor should be called for support, when the lease expires, when it should be retired, what the depreciation rate is, etc. This, in turn, provides the basis for managing and optimizing an organization?s entire asset portfolio.

When we speak of property management as part of asset management, it includes property selection, implementation of policies and performance standards for that property, and monitoring of its performance in relation to the owner?s objectives.

Generally, there are four broad stages of the asset lifecycle:

Planning and procurement: This involves planning, ordering, and receiving the technology.

Operations: This includes managing the day-to-day operations of the assets to maximize productivity.

Financial management: It involves ensuring accurate tax, depreciation, and other costs.

Disposal: Once it is time for disposal, you are required to remove the asset from the enterprise in compliance with environmental regulations.

Various tools are available for asset management. However, it is important to realize that asset management is primarily a process, and the tools aspect is just a small aspect of it. Since every organization is unique, with its own unique needs and strategies, the ideal asset management process for each organization differs.

Chris Tolamalu is interested in asset management. See http://www.assetmanagementjournal.com/ for more information.