Asset Management - Key Part of Business Management

Most manufacturing companies have recently discovered that fixed asset management should be a key part of the success of the business enterprise. It is now realised that fixed asset management leads to economy of production and operation. This in turn can to increase in profits of 10 to 15 per cent, which cannot be ignored as it makes a significant contribution to the bottom line of the business.

There is no doubt that inventory and production management deserves the main focus of the management for effective functioning in a manufacturing enterprise. If asset management was neglected, then fixed assets were not being effectively and efficiently managed. But in recent years it has been realised efficient management of fixed assets like plant and machinery and other movable and immovable fixed assets can lead to economies of scale. Thus proper monitoring and regular maintenance of productive fixed assets will give a longer productive life. The net effect of this is more profits for the business.

Naturally in fixed asset management, the assets responsible for production, research and development etc., which have direct bearing on the productivity of the business, need to be managed more closely. There must be constant monitoring on the maintenance aspect to prolong the useful life of the asset. Even a movable asset like a vehicle needs proper maintenance. Otherwise without regular running and maintenance the vehicle can soon become corroded and useless.

Every category of assets needs a different focus of management. Fixed assets need regular maintenance to ensure normal life of the assets depending on the wear and tear on the asset. Adequate planning is also necessary for building up financial reserves over the life of the asset for replacing the fixed asset at the end of its useful life. Thus the new plant and machinery can be ordered well in time to replace the old one.

Management also has to weigh the advantage of replacing the plant and machinery and other production assets or continuing to maintain the present production assets. They also must consider from time to time whether the asset has become obsolete owing to new technological advances. In recent times, technology has advanced at a rapid pace and management has to be vigilant on this issue to avoid being left behind by competitors. Asset management also includes adequate insurance to cover any extraordinary losses due to fire and natural disasters.

A type of awakening has taken place in major industries during the past decade on the role of asset management. It has become attractive due to decreasing margins and competition growing day by day. To avoid major capital spending, companies are now developing strategies to get optimum performance from available fixed assets thereby getting increased returns. This involves proper schedule of maintenance to minimise breakdowns and consequent loss of production.

In order to have reliability in scheduling, regular planning in conjunction with various departments, at least on a monthly basis is absolutely necessary. Standards must be set as well comparative analysis within industry standards must be evaluated to determine whether the company is achieving optimum production in line with the industry. If not, then suitable targets and best practices must be set up within a reasonable time frame to reach those targets.

Logistical performance must also be evaluated to consider whether transportation costs are economical and advantages of location are met. The management tools for evaluation can be in form of comparison studies, which can set up in form of graphs and bar charts for easy visual comparison. If fixed asset performance is seen to be below par, then priorities can be fixed for the focus on improvement.

Asset management tracking is vital in large manufacturing plant and utilities. Integration of asset management with raw material and maintenance procurement systems as well as financial systems and their cost versus savings benefits must be monitored on a day-by-day basis. Senior financial officers must therefore be involved in asset management.

Depending on nature of assets in different businesses. For example, utility companies, mineral companies, oil and natural gas are having large properties as part of their assets. These have to be effectively managed and timely decisions have to be taken whether to buy or sell properties for the health of the business. Depending on their values and necessity to the running of the company, the assets can be categorized for better management.

To assist company management, there are a number of established consultant companies having qualified manpower whose help will be beneficial for asset management. They can be very effective to audit present practices and suggest best practices, problem solving and action plans. It may be well worth the expense to hire established consultants to improve performance.

Asset management data can be computerised to enable management to chalk out strategies on an overall basis. Integration of asset management systems with other financial systems would give better picture of whole operation of the enterprise. This will enable various key officials to give their timely input to top management in order to devise suitable plans. For example, government may come out with special tax incentives for certain industries to invest in fixed assets. In a scenario where management is monitoring and managing fixed assets, the Finance Manager may quickly recommend purchase of new fixed assets to take advantage of the government's tax incentive for that business.

Lastly, it is the assets of a business which enable the production and delivery of its goods and services. So when fixed assets are being purchased or replaced a few important questions arise. What is the cost and cost benefit for the business. What funds are available? Should the asset be purchased new or secondhand or should it be leased and how will it benefit the business? Questions relating to the use of the asset could be. What are the operating costs? How much skilled and unskilled manpower would be required for operation? What are the training costs involved? What are the installation costs? What is the useful life of the asset? Is it the latest technology? These and many more questions need to be asked and answered. This will ultimately factor into the long-term strategy of the business.

Michael Russell

Your Independent guide to Asset Management

Asset management companies' guide

Be it any area or any sphere of life management is the key to success. Management of simple things such as your day-to-day activities etc. might not require much consideration but lot of planning is to be done when it comes to managing assets.

Asset management basically refers to managing money for individuals through stocks, bonds and cash equivalents etc. The asset management system has sprung from maintenance management systems and its aim is to optimize asset use and manage all maintenance efforts involved in making the assets as confidential, accurate and efficient as possible. The principles of asset management apply equally to all physical assets such as infrastructure, property, heritage, plant and equipment.

The strategy of asset management depends on financial aspects of ownership such as calculating the entire cost of ownership, depreciation, licensing, maintenance and insurance. Asset management can be in different spheres. For instance asset management in the field of property is known as property asset management, asset management in IT, in finance or investment asset management and asset management in inventory and physical stock.

Varying with the kind of an asset management strategy a firm or an individual can add value to his business, improve investment performance, manage financial risk exposure and reduce costs to business.

Keeping the incredible significance of asset management in mind, various asset management companies have mushroomed these days. An asset management company is a firm that invests the pooled funds of retail investors in securities in line with the directed investment objectives. By offering more diversification, liquidity and professional management service, an asset management service holds a niche above the individual investors.

A leading name in asset management and investment management services is Lazard. Lazard is known for investment banking with offices in more than 16 countries across the world. Lazard provides multiple services such as advisory services that include mergers and acquisitions, asset management and restructuring to corporations, partnerships, institutions, governments and individuals.

Similarly the Asset Intelligence unit of General Electric's Equipment Services has earned commendable name in providing intelligence based asset management and logistics services for commercial and transportation equipments. Hardcat is a leading asset management solution provider in UK, Australia and USA.

The joint venture between UK's top ranking insurance company Prudential Plc. and India's recognized financial institution, the ICICI Bank Ltd. has resulted in the ICICI Asset Management Company to supplement the Indian investor mutual fund products with different growing needs of investment.

All these proficient companies keep in mind the fact that investment is quite a challenging task that requires tremendous planning and risk. These companies function in a way to produce better risk-adjusted investment returns and present investment solutions to the clients.

Recently the prizes of traded asset management companies have touched the sky primarily due to two reasons- rising stock markets and industry consolidation. A paradigm instance here is that the Legg Mason shares increased by 76% due to the news that it was taking over Citigroup's asset management business.

All in all asset management companies are ideal resources to drive costs out of your business operations, increase profitability and get access to vast information database for making a prudent choice

Mansi gupta recommends that you visit Asset management companies for more information.

What You Should Know About Property Management

Now that you have made an offer to acquire a commercial property and are waiting to close escrow, you may want to start looking for a property manager to professionally manage the property. Your real estate investment advisor should present you with 2 or 3 local companies, each with its own proposal. Your job is to decide which company you will hire. The property manager will be the main point of contact between you, as the landlord, and the tenants. Her main job is to:

1. Receive and collect the rents and other payments from your tenants. This is typically simple until a tenant does not send the rent check. A good property manager will somehow get the tenant to pay the rent while a lousy one will throw a monkey on your back!

2. Hire, pay, and supervise personnel to maintain, repair and operate the property, e.g. trash removal, window cleaning, and landscaping. Otherwise, the property loses its appeal, and customers may not patronize your tenants? businesses. The tenants then may not renew their lease. As a consequence, you may not realize the expected cash flow.

3. Lease any vacant space.

4. Keep an accurate record of income and expenses, and provide you with a monthly report.

A good property manager is critical in keeping your property fully occupied at the highest market rent, the tenants happy and in turn helps you achieve your investment objectives. Before choosing a property management company, you may want to:

1. Interview the company with focus on how the company handles and resolves problems, e.g. late payment.

2. Talk to the person who will manage the property day to day as this may be a different person from the one who signs the property management contract. You want someone with strong interpersonal skills to effectively deal with tenants.

The property managing company normally wants a contract for at least one year. The contract should spell out the duties of the property manager, compensation, and what will require the landlord?s approval.

Agent?s Compensation: you will have to pay someone to manage and lease the property. You may have one company to manage the property and a different company to lease the property. However, it?s best to work with one company that handles both managing and leasing to save time and money.

1. Management fee: the fee varies between 3-6% of the base monthly rent for a retail center, depending on the amount of work needed to manage the property. For example, it takes much less time to manage a $2M retail center with just a single tenant than a $2M retail strip with 12 tenants. So, for the center with 12 tenants, you may have to pay a higher percentage to motivate the property manager. You should negotiate the fee as a percentage of the base rent instead of the gross rent. Base rent does not include NNN charges. Ideally, you want a lease in which the tenants pay for their share of property management fee.
2. Late fee: when a tenant pays late, he is often required by the lease to pay late fee. The property manager is allowed to keep this fee as an incentive to collect the rent.
3. Leasing fee: this fee compensates the property manager to lease any vacant space. In a typical lease contract, the leasing company wants 4-7% of the gross rent over the life of the lease. It also wants the leasing fee to be paid when the new tenant moves in. In addition, the leasing company wants around 2% of gross rent when the lease is renewed. The tenant may also ask for Tenant Improvement (TI) credit, typically between $10-20 per square foot to pay for construction expenses. So if a new tenant with a 10-year lease goes under after one year then you may lose money. As the landlord you should:
   • Approve a long term lease (10 years or longer) only when the tenant?s financial strength is solid. Otherwise, it may be better to reduce the lease to 3-5 years.

   • Make sure the new lease has a provision for some kind of rent escalation, preferably based on Consumer Price Index (CPI), i.e. inflation which is 3-4% a year instead of lower fixed 1-2% annual increase.

   • Consider TI request from the tenant as one of the factors to approve a lease. The TI credit depends on whether you need the tenant more or the tenant needs you more.

   • Negotiate for a flat rate renewal fee, e.g. $500 instead of paying a percentage of the rent for the life of the lease. The negotiation is easier with one company that handles both leasing and management.

   • Negotiate to pay the leasing agent a lower percentage, e.g. 4% when no outside leasing broker is involved.
     

You can see that it?s very important to minimize tenants? turnover rate as it has a direct impact on the cash flow of your commercial property. A good property manager will help you achieve this goal.

Monthly Report: each month the property manager should send you a report on income received, expenses incurred, and property status. You shouldReview the report to see if the numbers make sense. You should:

1. Request a report showing both rent and CAM fees received.
2. Request a separate bank account for your property and have a monthly bank statement sent to you. Without this, the property manager will deposit and commingle all the rents from all properties that she manages into her company?s bank account.

If you instruct the property manager to send you the excess cash flow then you will also get a check.

Landlord?s Approval: the management contract should specify the dollar limit for exceptional maintenance expense above which would require your approval. This amount varies from landlord to landlord as well as the type of property. However, it?s typically somewhere between $500 to $2,000 dollars.

Communication with property manager: in the first few months, you and the new property manager should communicate often to make sure things go smoothly. You should give instructions in writing, e.g. email, to your property manager and keep records of all your correspondence. If the property manager does not do what you instructed, you may refer to your records and minimize disputes.

If you want to work hard for your money, you may want to manage your own property. However, if you want to work smart, your partner should be a good property manager.

David V. Tran is the CEO eFunding Inc., a commercial real estate brokerage, commercial loan broker, property management, self-directed IRA investment, TIC and syndication company in San Jose, CA. His website is http://www.efundingcom.com. He may be contacted at (408) 288-5500. eFunding does business in all 50 states. He is selected as Pensco Trust?s (a major self-directed IRA custodian) Preferred Professional. David is well-known for his 3 FREE real estate investment seminars:

1. How to invest in commercial real estate for retirement income NOW.
2. How to maximize cash flow with 1031 tax-deferred exchange.
3. TIC/Syndication: strategy for small investors and self-directed IRA investors to acquire high-valued properties.
   

   You are welcome to share this report, unedited and in its entirety, with anyone you like. You may not remove this text. ? 2007 eFunding, Inc.
   Andrew La is a real estate and tax attorney, CPA and Real Estate Broker in San Jose.

Property Management Considerations for College Housing

Property Management is not easy, but there are ways to make your job easier if you will understand a little about human psychology and work with the tenants whether they be business owners or residents. One group of properties that is an industry sub-sector is managing properties for college housing. The students will be renting the properties for the school year about nine months. So you need to average your costs over twelve months and total it up and then divide by nine for your costs.

Next you need to figure in the problems that occur and get busy signing people up for next year. Of course remember these are party animal kids and therefore you will need a substantial deposit from them up front and guarantees from their folks that you will be paid. If anything goes wrong you zap the deposit and let the parents know that one more incident and they are gone. Of course all this must be done swiftly, efficiently and without aggressive action. Warnings will help and nice polite staff is the key to diverting potentially hostile problems from these kids.

Being on good terms with the College or University is certain to help fill up the buildings thru referrals from the student information offices. Finding additional properties can be tough if the area is not use to massive numbers of young adults in the area. Most citizens nearby will complain and attempt to prevent that type of usage, as it adds lots of traffic, parties and just over congestion to the area. These are all interesting considerations to be discussed when contemplating property management strategies for College Housing Units.

Lance Winslow, a retired entrepreneur, adventurer, modern day philosopher and perpetual tourist.

Property Management in Louisville

Whether you are just getting started with a few projects in Louisville or are a long time property manager you know that you have quite a busy task ahead of you. Property Management in Louisville is not nearly as simple as it once was. Due to increasingly rigid city codes, a rise in required paperwork, contracts and more, being a property manager is a time consuming venture. There are many time and money saving options available to managers, but none are as effective as the use of property management software

Many property managers have given property management software a try and had great success with it. Not only has it saved them time and money, but it has organized aspects of their business that were previously a mess. Others have yet to even give management software a try because they fear it won't be flexible enough to fit their personal management needs. Contrary to these ideas property management software is actually quite versatile and an excellent aid to property managers.

• Product Management Software Versatility

Many property management software systems are exactly as one may fear. They are tailored to one type of management style and will only work if you manage your property in the way the software is set up to run. This type of software may be good from some beginners, but property managers, for the most part, are incredibly creative and intelligent and want to manage their properties in their own way. If you are that type of property manager you need to find a software program that is flexible enough for varying business plans. A program that is intended for the management of thousands of properties will not work for someone who is only managing ten or twenty properties. A good software program will allow you to manage your properties in the way that you choose to be best suited for your business plans.

• Features

Management software should come equipped with many useful features, but frequently those features are not actually included. Some software programs will list all of the things that they can do, but once you actually purchase them and put them to use you learn that those features are not standard, but come with a monthly fee for their use. A good software program should come standard with all the features it advertises. They should be included in a low monthly fee, and not in addition to the previously quoted fee. You would not buy a car just to find out that in addition to your monthly payments you also will be required to pay a brake light and headlight fee. The same is the case with property management software.

• Online Capabilities

In the modern internet age we live in, it is becoming more and more important to be able to run our businesses over the internet. A business that is not internet friendly is an unprofitable business. This is another thing to consider when choosing property management software. You need a software program that you can use on the internet and whose functions are internet friendly. It would be a detriment to your business to not be able to have this option available. An internet friendly software program is a must.

In general property management software can be very useful when collaborated with your property management in Louisville if you find the right software for your needs.

Kent Fairbourn is an avid sports fan and Client Account Specialist for 10x Marketing. Go now to see how Buildium can help you manage your properties.

Kent Fairbourn is an Account Specialist for 10x Marketing