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What IS a Corporate Asset Management Plan?
A corporate asset management plan is akin to a roadmap on how best to utilize your corporate assets so that you can fully maximize their potential to best serve and accomplish your company’s goals and objectives. It is a strategic type of planning, documented to enable focus, consistency, and efficiency in working towards achieving a company’s goal on asset utilization. Corporate assets are those tangible and intangible items, materials, or resources that the company owns to operate or run the business. Tangible assets usually come in the form of equipment, vehicles, machinery, infrastructure, cash, et cetera. Intangible assets, as the word suggests, do not have a physical form. Intangible assets typically are the expenses, inventory, accounts receivable, manpower, patents, licenses, and so on.
4 Types of Assets
Assets, whether tangible or intangible, are resources that offer some value for business growth and expansion. Identifying and determining the right assets to utilize is crucial to a business’s survival. If a business is able to accurately identify and fully maximize its assets, business owners can then easily project its financial outcome and position in the market. To wit, having the appropriate corporate assets can help provide accurate financial reports that include profit and loss, as well as a better understanding of where the business is heading and the business’s position in the current market. Here are the four common asset types found in any corporate portfolio.
Making a Corporate Asset Management Plan
A company’s success depends on how well the business manages its assets. Or, the company is only as good as the assets it has. That’s where the importance of managing corporate assets comes into play. There’s no hard and fast rule when it comes to creating a corporate asset management plan. An asset management plan should be created that’s flexible enough to meet the company’s goals and objectives. An asset management plan works alongside other core planning strategies of a company, which includes business planning, financial planning, sales planning, and even marketing planning. At the end of the day, an asset management plan’s the gauge of effectiveness when it has successfully maximized the use of assets that greatly benefit the company as a whole. Here are some of the essential elements that need to be included in a corporate asset management plan.
1. Executive Summary
An executive summary of a corporate asset management plan provides a brief background of the company and how it was able to acquire its assets. It also provides a short explanation of why there is a need for an asset management plan and an overview of the steps on how they plan to manage the company’s assets. The executive summary basically provides the goals and objectives of the plan. Executive summaries also tend to include a mission and vision statement. A mission statement states the purpose or the reason behind the creation of the corporate asset management plan. It also reflects the company’s culture and values, or how the company puts in regard or values its assets. A vision statement provides a depiction of what the company hopes to achieve through the use of its assets, usually in a given period of time. It is typically a call to action, a motivation for both the owner and its employees to be focused, consistent, and committed to working towards accomplishing its goals and objectives.
2. Asset Inventory
The first thing you need to do before starting to actually manage your assets is to find out what exactly are your current or existing assets. Of course, it’s foolhardy managing things you’re not aware of. Do a complete asset list inventory. This inventory will be useful later on when you’re doing your financial planning or drafting your balance sheet. Your inventory needs to include all the kinds and types of assets your company has, where these assets are situated or found, what the value of these assets are, what their lifespan is, or how and when they were created or built, including their life cycles or their maturity dates, as applicable. For each asset identified, provide a brief description. Aside from the make, form, type, or classification, the description could include the use or purpose for these assets, including what are these assets’ current condition in the market. Current conditions mean are these assets performing well or not, or are these assets being maintained or looked after or not.
3. Asset Life-Cycle and Its Expenses
Managing corporate assets means determining the costs or expenses required to maintain the assets’ performances. These expenses typically include capital, maintenance, disposal, even including marketing strategy and sales strategy expenses. Life-cycle expenses involve the whole lifespan of how the assets are utilized, which starts from the planning, acquisition, managing and operating, maintaining, and the eventual disposing of the assets. The typical process of asset management begins with concept identification. Concept identification is identifying what are the existing needs and identifying the assets that represent a solution to those needs. Next comes the development process. Oftentimes this is where the purchasing and acquiring of the identified assets take place. Then comes the installation. Installation is the start of the utilization of the assets, both tangible and intangible assets. Maintenance comes next. This is especially applicable to tangible assets. Maintenance includes the cost for training of employees on how to use these assets, cost of property maintenance and repair, spare parts, consumables, facilities, machinery and equipment, contract services or third-party services, routine inspection, et cetera. Next are the support services. Support services are the overhead expenses, which include administrative support, general and customer service support, disassembly, removal, recycling, disposal, and so on. Last but not least is what is known as the residual value. The residual value is the computed value of the asset at the end of its life cycle. It is the net of the income generated from its use, less the maintenance, support, and other services it has gone through, including upgrading or downgrading.
4. Levels of Service
Levels of service are about the assets’ performance when it comes to reliability, quality, quantity, safety, responsiveness, capacity, sustainability or environmental impacts, comfort, affordability, as well as legal compliance. It all begins with what are the company’s requirements or expectations before availing these assets. Assets are acquired not only to serve the company’s requirements but also that these assets are able to service the company’s policies and commitments of meeting goals and objectives. Levels of service are usually part of the after-sales process or after the acquisition of the assets. It consists of a detailed schedule of maintenance, inspection, consultation, or replacement as necessary. These levels of service usually come in the form of an agreement, known as a service level agreement, between the company and the contractor.
5. Financial Planning
Corporate asset management should be part of your financial planning. Asset management is part of the cost and expenditures recorded in your cash flow statement and in your balance sheet. Particularly the balance sheet, the balance sheet reflects the overall company’s assets, liabilities, including shareholders’ equities. The balance sheet reflects what the company owns, what it owes, including the amount invested by shareholders. The financial planning section should serve as a guide in determining how feasible the acquisition and maintenance of the company’s assets are if there are enough funds to maintain and support these assets, and also outline the ins and outs of the company’s cash flow.
What are some of the benefits of asset management?
There are many benefits coming from planning for asset management. One of the benefits is improved reliability and performance. This results from regular check-ups, inspections, maintenance, and even parts replacements as applicable. An asset that’s regularly checked, maintained, or serviced is akin to a well-oiled machine that performs reliably. Another benefit is the cost-saving factor. Having an asset management plan also entails having a good financial plan. The financial planning section determines how feasible the acquisition of assets is, if there is enough funding for the purchase and maintenance of these assets and if the performance of these assets is advantageous for the business and outweighs its costs and expenses. Improved regulation compliance is another benefit coming from asset management. Regulation compliance refers to the local or jurisdictional requirements required from a business. This usually comes in the form of environmental compliance. Assets, before they’re acquired, should meet regulatory requirements in terms of how they’re utilized and eventually disposed of.
What are the different investment strategies when allocating assets?
Assets are more than just your machinery, equipment, tools, facilities, or infrastructure to run your business. Assets also form part of a company’s investment strategy that can be highly beneficial for the company as a form of passive revenue. We have touched upon the intangible types of assets in the form of cash, cash equivalents, fixed-income, equities, and so on, and depending on their liquidity how they’re able to bring in passive revenue streams for a short or long period of time. One investment strategy is known as strategic asset allocation. Strategic asset allocation is about the diversification of asset allocation to balance and manage the risk. Dynamic asset allocation is also another strategy wherein the investor sells the assets when it has declined in value and purchases when the value of the assets increases. Another strategy is called integrated asset allocation. Integrated asset allocation considers the risk appetite of the investor, utilizing a mix of strategies as appropriate.
What are some of the barriers to corporate asset management planning?
Corporate asset management planning is not without its own obstacles or problems. Some of the problems encountered are human error through erroneous data entry of assets or inaccurate data capture. Accuracy is required when encoding assets’ lifespan or life-cycle, including related costs and service levels. Inability or lack of accuracy when assessing and preventing risk is another problem. An unstructured management process is also another problem, meaning, when the assets were acquired, there was no proper planning and managing that was in place to deal with the assets. Another barrier is the lack of training, skills, or expertise of the personnel in dealing with the assets.
Corporate assets bring value to any company. Depending on how you manage these assets, the performance of these assets could make or break your business. These assets could be the ultimate tool for a business’s success, or they could also be the cause for the business’s downfall if not handled properly. To properly manage and utilize your company assets to their full potential entails the use of an effective corporate asset management plan.
Check out our corporate asset management plan templates. They’re ready-drafted with steps that can guide you on what will be the next best steps to maximize your company’s assets to get the full benefit from it. Download one now!