What is Asset Management and Why is it Crucial for Modern Businesses?

Having firm control over your assets can save money, mitigate risks, and ensure your business can grow smoothly. Critically, asset management is as crucial for small businesses as it is for larger peers. Every company can benefit from preventing damage and loss or avoiding unexpected repairs. We'll answer that question and more in this quick guide.

What is an Asset Management System?

In simple words, an asset management system is all the processes involved in keeping track of business equipment and inventory. These can include written policies that define how assets should be managed, as well as asset management software that helps facilitate this process.

But what exactly are assets? The term "asset management" is most commonly used in the finance sector, where it refers to the practice of increasing your total wealth over time by obtaining, maintaining, and trading assets that have the potential to increase in value. However, in business, it has a slightly different meaning. In the business world, assets can be anything from buildings, product inventory, patents, office furniture and equipment, software, hardware, factory machinery, and even people (employees). Assets are all the things a company owns.

Essentially, in business, companies are less concerned with whether their assets grow in value over time and more concerned with knowing an asset's location, value, performance, and risks.

What's the Purpose of an Asset Management System?

The primary purpose of an asset management system is to help companies keep track of fixed assets (assets purchased for long-time use) like IT equipment, industrial machinery, manufacturing equipment, vehicles, and other assets related to how the business runs and makes a profit.

The best way to understand the value of asset management software is to visualize a company without one. Sure, in a small company, you might only have a few assets to manage and be able to keep track of these in your head or on a simple spreadsheet. But most companies don't plan on being small forever, and managing business assets becomes much more critical when you grow.

For example, suppose a growing company doesn't have an asset management system. How will they know when an item has been lost or stolen? Without access to accurate real-time information about an asset, they could continue to pay insurance on assets that are no longer within the company's control, ultimately sapping the bottom line.

Additionally, tracking and scheduling preventive maintenance for equipment or machinery becomes much more challenging in the absence of an asset management system. As a result, assets may depreciate much faster or break entirely - an avoidable situation with the right asset software.

Lastly, keeping track of assets becomes extremely time-consuming without asset systems. For example, records for specific equipment or vehicles might be scattered throughout the office in ad hoc locations like employee desk draws. Getting hold of these records when you need them might take employees away from more critical work. It could also force managers to guess what new equipment the company needs.

The Benefits of Asset Management Software

Asset management software is essentially a dedicated application that helps you keep track of all assets throughout their lifecycle, from procurement to disposal. Here are some of the benefits of implementing asset management software for your business:

• Manage everything in one place. Using a centralized system that allows you to check the status of an asset at any time from one location is a huge time saver.

• Eliminating manual asset management processes helps reduce errors. In business, mistakes can be extremely costly. In fact, one study found that errors or "bad data" cost US businesses a staggering $3.1 trillion a year.

• Never miss maintenance. Asset management systems alert staff when equipment is ready for maintenance, which ultimately increases the longevity and performance of the equipment. This can save money on early replacements or expensive repairs.

• With a complete overview of asset use, you can make adjustments or improvements to how you use your assets, ensuring they're always in the place where they can have the most significant impact.

• Boosted profitability and reduced waste.

• Accurate and comprehensive recordkeeping helps ensure compliance and means you can generate reports quickly.

• Increased security. When you know where your assets are supposed to be, you'll spot ghost assets (lost or stolen) much more quickly. This means you don't have to worry about your assets ending up in the wrong hands.

That's everything! We hope you've learned what asset management systems are and why they're essential in the digital age.