Asset management is an important and crucial element of business ownership in the UK. It ensures that assets are responsibly sourced, maintained, and utilised to support business growth and success around the UK.
When business assets are properly managed they can offer a treasure trove of potential revenue opportunities, strengthening a company’s financial standing. As such, understanding the best practices surrounding business asset management is essential.
Let’s take a look.
What are Business Assets?
According to Business.com, “Business assets include anything the business owns that has a positive economic value and could sustain production and growth.” In other words, they are business resources that could generate future cash flow in addition to serving day-to-day business needs.
Common examples of business assets include:
- Commercial property
- Machinery
- Electronic equipment
- Workplace vehicles
- Investments
As a business owner, you must be able to clearly identify your assets and how much they are worth, especially when you are managing your financial affairs. It will make this process so much easier.
Therefore, the most important thing you can do as a business owner is understand how to manage your assets effectively. That’s where we come in.
The 5 Most Important Elements of Asset Management
There are 5 foundational principles for proper business asset management. These are:
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Asset Inventory
All business owners must keep a comprehensive inventory of their assets. This inventory should include all relevant information, such as asset description, value, condition, location, licence, and maintenance records.
Keeping a detailed asset inventory is essential for properly keeping track of business assets and managing their use and maintenance requirements effectively. What’s more, it’s one of the best ways to protect your assets against loss.
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Life Cycle Costing (LCC)
Life Cycle Costing, otherwise known as Whole-life Cost, involves estimating how much an asset and its associated expenses will cost over the course of its lifetime. The LCC should include expenses such as asset acquisition, maintenance, and proper data destruction and disposal.
By taking into account Life Cycle Costing, you will understand the total costs of each asset you own, rather than just the initial expenses. This helps to align costs with an asset’s associated risks and benefits. So, you can make an informed decision as to the cost-efficiencies of the assets you hold.
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Risk Management
It is important to determine the associated risks of significant assets and evaluate the potential business consequences if such risks were to become a reality. This will help you to strategically allocate business resources and maintain a high level of safeguarding around the assets you hold.
Managing risks also involves introducing risk mitigation measures such as back-up plans if things go wrong, proactive maintenance schedules, and hefty insurance policies. When your business has the appropriate risk management practices in place, business critical operations can continue even if assets break down or fail.
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Performance Standard
Part of effective asset management means defining the standard performance expected from each one of your assets. Performance standards encompass factors like safety, responsiveness, uptime, and lifespan.
Understanding the performance standards of your assets helps to set clear expectations within your business as to the effectiveness of your assets and whether they are continuing to serve your business objectives.
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Asset Funding
Managing assets takes time and costs money. Therefore, adequate funding is important. Securing asset funding might include taking out a business loan, leasing assets for set time periods, or ensuring a healthy cash flow before investing in long-term business assets. Having the necessary funds available prior to investing in assets will ensure you have the resources needed to cover your costs over the long term.
Business Asset Management Begins Here
Learning how to acquire and manage business assets can feel like a daunting task. However, with the right information and support you can move forward with confidence.
We hope this article helps you take control of your assets and utilise them properly to better support your business success. Learn more on the Priority WEEE blog.
