Do you ever feel like your finances are quivering under the weight of your responsibilities? Like a great big pile of shoes on your closet floor, assets can quickly become disorganized and overwhelming. A major way to clear this up is through effective asset management.
Proper asset management looks different for everyone depending on their financial goals and situations, but the fundamental purpose of asset management is the same; to ensure that one’s assets are working efficiently and are aligned with their long-term financial plan.
In this article, we will uncover the secret of asset management to help you make the most of your finances. Let’s dive in!
What is Asset Management?
Asset management is the process of gradually building up overall wealth through the buying, maintenance, and trading of investments with the potential for growth.
Let me tell you a story that should help you understand asset management in a nutshell. Assume I am a successful businesswoman who owns a small restaurant chain. My restaurants, inventory, team, and investments are just a few of the many assets I own. I want to make certain that every resource I have is being used wisely to help my firm thrive. I’m sure everyone wants this.
What should I do? To manage my assets, I hire an asset manager. Let’s call her Amanda. Amanda’s job is to oversee that all my assets are used in the best way possible. The first thing she did was to analyze my financial situation and identify any areas where I could cut costs or increase profits.
The next thing she did was to make sure that my restaurants were running smoothly and that the inventory was being managed effectively to reduce waste and make more profits. She also looked at my staff and ensured they were all well-trained and working efficiently.
Lastly, she looks at my investments and recommends how to make my holdings diverse. You remember that all these are parts of my assets, right? Thanks to Amanda’s asset management skills, My business grows and becomes even more successful. And that, my friend, is asset management in action!
Types of Asset Management
It is important to find the type of management that is better for your business to manage your assets efficiently. There are different types of asset management, but these three main types are recommended.
Financial asset management
Financial asset management essentially entails spending your money in a way that advances your financial goals. It involves creating and maintaining a diverse investment portfolio that is in line with your long-term goals and your risk tolerance.
You may maximize profits and decrease risk by actively managing your investments, which will lead to a more stable financial future.
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Financial asset managers are in charge of studying market trends, economic indicators, and corporate financial data in order to identify investment possibilities that would provide the best returns for their clients.
They also examine the risks connected with various assets and devise risk management techniques.
Physical asset management
This type of asset management involves managing physical assets such as buildings, equipment, and vehicles. It is a method for carrying out effective maintenance throughout the lifespan of a manufactured good or piece of property.
Physical asset management makes it easier to do maintenance, repairs, upgrades, and asset disposal at the end of its useful life.
This strategy, also known as service asset management, is mostly used when machinery, devices, cars, and other complex assets that generally have long operational life cycles are involved.
The main goal of physical asset management is to improve the effectiveness, lifespan, and performance of assets while they are in use. Physical asset management is used by manufacturers as well as owners and operators to optimize service activities.
Enterprise asset management
The third type of asset management you should try out is enterprise management. This involves taking care of all the things an organization needs to run smoothly, like equipment, facilities, and vehicles. Enterprise asset management aims to ensure everything is working properly, minimize downtime, and save money on repairs and replacements.
Enterprise asset managers are responsible for keeping track of all the assets and scheduling maintenance and repairs as needed. They also develop plans to replace assets when they reach the end of their useful life. Think of them as caretakers who ensure everything runs smoothly so the organization can focus on its core activities.
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Principles of Asset Management
The following are the key principles of asset management:
Understanding the organization’s objectives and how assets can support them
Before you can start managing your assets, you need to understand what your company is trying to achieve. If your company wants to cut budgets, you have to first choose which asset management type is better for you, then review which assets can support them and which ones you may need to dismiss or discard. Once you know that, you can figure out how your assets can help you get there.
Understanding the value of assets and their impact on the organization’s performance.
Assets aren’t just things you buy and use; they’re investments in your company’s success. It’s important to understand how much they’re worth and how they affect your performance. Do not gamble with assets. Avoid choosing quantity over quality because it will have a negative effect on your business.
Managing assets over their entire lifecycle, from acquisition to disposal.
From the moment you purchase an asset, you need to start maintaining it. You don’t have to wait till it gets bad before taking care of it. You cannot just throw a cutlass away because it is blunt. You have to carry out all necessary management till it’s time to get rid of it. This is the same for every other asset.
Adopting a risk-based approach to asset management.
Every asset comes with some level of risk, whether it’s the risk of it breaking down or becoming obsolete. You need to be aware of these risks before you purchase (or employ) an asset. Be ready to face (and manage) the risks that may come with it in the long run. In fact, add it to your asset management plan,
Making informed decisions based on data and information.
Don’t just make decisions about your assets based on gut instinct. Use data and information to make informed decisions that will help you get the most out of your assets. You can also ask questions and read articles like this one to help you decide what’s best for you and your business.
Continually improving asset management practices.
Asset management is an ongoing process. As your company evolves, your asset management practices should evolve too. Continually look for ways to improve and optimize your asset management to support your organization’s objectives.
Stages of Asset Lifecycle
To make the most of the asset lifecycle, you need to properly understand the principles guiding this strategy and how they apply.
An asset lifecycle is an efficient management technique employed to optimize a business’s assets. It can better be explained as the numerous processes an asset goes through during its lifecycle. And there are four primary stages of the asset lifecycle.
- Operations and maintenance
The initiation stage of the asset lifecycle is the planning stage. And it is undoubtedly the most essential of all four stages. This is the stage where the asset requirement for the organization is assessed, analyzed and evaluated. It is at this stage that the business goal is visualized from start to finish.
And this task is achieved by using an asset management system that reads and analyzes data on the asset makeup. With this method, it will be a lot easier for stakeholders to recognize the asset value and assign it a specific role where needed.
The acquisition stage of the asset lifecycle is more like a propagation stage. It’s the stage that sets in motion the executive of the initial stage. After an asset has been properly analyzed and identified, the next step is to acquire it.
It is also important to state that the acquisition stage is accompanied by a financial situation. While it may be true that the intent of acquiring a certain asset is to improve business operations, the purchase of that asset is within the confines of your planning budget.
This is to say the asset can only be acquired if your planning budget permits it.
It will also interest you to know that you can keep complete track of the whole lifecycle of the asset by using an asset management system.
Operation and maintenance
Moving forward is the operation and maintenance stage of the asset lifecycle. And it is commonly known as the longest phase of an asset life cycle because of the nature of work involved in the stage. This is a two-in-one task.
The operation and maintenance stage is the real-time application of asset management skills. It is also at this stage the organization assigns a team of well-trained experts to make sure that the right tools are used for the right job, as well as used properly.
In the operation and maintenance stage, the asset is properly monitored and maintained during operation and is repaired when faulty. The main objective of the operation and maintenance stage is to reduce downtime, optimize asset efficiency and eliminate emergency repair expenses.
It is important to note that the operation and maintenance stage is not only centred on repairs, and this is why various maintenance methods like preventive, corrective, predictive and corrective maintenance methods are employed in this asset lifecycle stage.
The last and final stage of the asset lifecycle is the disposal stage. Or, like the way I like to put it, the termination stage. At this stage, the asset no longer serves its intended purpose for the business or organization and has to be done away with.
Despite the fact that the supposed asset may no longer be functional, it ought to be disposed of carefully to prevent pollution or environmental hazard. You can either sell the former valuable asset to a firm with a lesser operational demand for its current state, throw it away, recycle it to its original state, or re-purpose it for a different task.
The method of disposal is largely dependent on the condition of the asset and also the company’s policy. An asset can be recycled, then rebranded and reused by a certain organization.
Please note, before disposing of an asset, make sure to clear and erase whatever value data and information embedded in its storage.
Why Nigerian businesses need Asset Management
Nigerian businesses, especially chain businesses and businesses that have a lot of assets need asset management to help them make wise decisions about these assets and to manage them effectively.
Asset management can help Nigerian businesses optimize the use of their assets, reduce costs, and minimize risks. It can also improve their financial performance, increase their competitiveness, and achieve their goals, by adopting asset management.
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Any firm that has physical assets must have an asset management strategy in place. Organizations can lower costs, improve productivity, and boost overall performance by managing assets proactively. Asset management may be a powerful strategy for achieving business goals and fostering achieving success when used correctly.
Just as talent management, lead generation, and other components you add to your company to make it successful are important, asset management is a major ingredient in the recipe for business success. Get an asset manager to handle it, then watch how your business elevates.
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- Samuel Princess Oghenekeno is an experienced content and creative writer. She optimizes content with excellent data structure, relevant keywords, and with other important SEO strategies that drive good organic traffic to your website. She is also a social media manager and personal development and mental health advocate.
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