Asset management – Every company must have one or several assets at once, ranging from tangible to intangible such as land, buildings, production machinery, production equipment, copyrights, stocks, trademarks, and others. Companies need to manage their assets by carrying out proper asset management.
This must be done because assets are an essential part of a company that must be appropriately managed. That way, it can benefit the company and encourage the achievement of company goals.
In this article, we will discuss asset management in more detail, starting from the meaning, benefits, goals, and cycles, along with tips you need to apply in managing assets.
Definition of Assets
Before knowing asset management, consider the explanation of assets below.
Assets are things that have economic value that can be owned by individuals, companies, organizations, and even the government that can be assessed financially.
If seen explicitly, from an economic point of view, assets are goods (things) or something (anything). These goods can be owned by a person, private organization, or government that has economic value, commercial value, and exchange value.
In addition, assets can also be interpreted and viewed from an accounting perspective, such as:
- Current assets (cash and other current assets)
- Long-term investments or fixed assets (long-term assets such as houses, real estate, factories, tools, and equipment)
- Prepaid and deferred assets ( expenditures for future costs ) such as insurance, leases, and interest
- Intangible assets include brand or trademark rights, patents, copyrights, and goodwill.
Well, that’s an explanation of assets. Now you can understand more about what asset management is.
Definition of Asset Management
Asset management is generally a process of managing assets owned by individuals, organizations, or companies that are carried out effectively and efficiently to achieve the goals set.
According to Gima Sugiyama (2013), asset management is a science or art that guides wealth management. This asset management includes planning, acquiring, appraising, operating, maintaining, renewing, and writing off to transfer assets effectively and efficiently, including inventory and legal audits.
According to Hariyono (2007), asset management is a structured process that includes all assets as a wealth to support the provision of services. The banking and insurance industry first developed the concept of managing assets and liabilities simultaneously. This concept can also be used to improve the operational activities of any business, including the MSME business.
Meanwhile, Kaganova and McKellar said that asset management is the process of making decisions and their implementation by acquiring, using, and distributing the assets themselves.
According to Danylo and Lamer (1999), asset management is a methodology for efficiently and fairly allocating resources among valid and competitive goals and objectives.
Asset Management Objectives
After discussing the meaning of asset management, the following discussion is the purpose of asset management. There are several objectives of asset management in a company, including:
1. Ensuring the Ownership Status of an Asset
Asset management is carried out to avoid the risk of asset misuse. With proper management, ownership of an asset can be transparent.
2. Choose the Right Asset Investment
Reducing the number of losses is the goal and benefit of asset management. The company can reduce the risk of future losses by making a priority scale and using a budget for the best assets.
3. So that asset values remain high, maintained, and have a long life span
Asset management is carried out to build awareness of the owners so that they continue to preserve the value of their assets. In asset management, the owner will learn if the asset’s value increases or decreases depending on how the company or a person manages it.
4. Ensuring an Asset so that It Can Generate Maximum Profits
Asset management is carried out to determine the status and condition of assets. When planning and maintenance, the asset owner can decide if the investment still has a high value and continues to increase. This asset management can aim to write off assets if they do not have high value and instead cause future losses.
5. Achieving Optimal Use and Utilization of Assets
Asset management has a goal so that business owners can also utilize their assets optimally and get the maximum benefit from the assets they own. Periodic control of these assets can make the company’s assets more careful before purchasing holdings so that the company will choose investments with increased profit levels.
6. So that costs can be minimized during the age of an asset
With asset management, company costs can be minimized so the company’s finances can run well.
7. As a Requirement for Safeguarding Assets and Funds
The company performs asset management to allocate assets so they can be used efficiently in the long term. That way, companies can prevent asset values from dropping or wasteful use of assets and funds.
8. As a reference in preparing the balance sheet in preparing reports
The purpose of carrying out further asset management is as a reference in making a balance sheet. By knowing a balanced balance sheet, the preparation of financial reports can be maximized.
Asset Management Benefits
The company can reduce non-optimal expenses and increase income by implementing asset management. However, there are other benefits of asset management, including:
1. Maintaining Asset Value
This benefit is to maintain the value of company assets. With careful planning, the company can reduce the risk of losing the weight of its assets due to loss or damage. Therefore, the company’s asset value will remain high and survive despite unfavorable situations.
2. Increase Security
Considering that the number of assets a company owns is not tiny, implementing asset management will be beneficial to keep assets safe and avoid the risk of loss or damage. In this case, a special team will handle it, so the company doesn’t need to worry because the assets have been recorded and stored appropriately and safely.
3. Facilitate Budgeting
Asset management is carried out with a unique system to facilitate the preparation of the company’s budget. This information system allows companies to know their assets’ condition, so the budget preparation process is more practical and flexible.
4. Prevent Excessive Purchases
Another benefit of asset management is that it prevents companies from over-purchasing assets. With existing data from the asset management team, companies can prepare budgets based on priorities and reduce costs.
5. Make Risk Management
Asset management is carried out to manage assets and prevent the company from experiencing losses in the future. However, asset management cannot predict future threats. Therefore, asset management applications must also be complemented by the creation of risk management to help companies manage the uncertainty of their assets in the future.
6. Monitor the arrangement of assets
Preparing these assets is an activity that the company needs to watch out for. If used continuously, the support quality will decrease in function and value. Therefore, the role of asset management is to monitor the required investments.
How Important is Doing Asset Management?
If you look at how important it is for companies to carry out asset management, then asset management is essential and essential to do. This is because, with proper and transparent asset management, the company can maintain the value of its assets to remain stable.
Asset management can also help company performance to increase profits in terms of income and achieving goals.
If the company implements good asset management, the company can also minimize risks that can occur and cause damage or a decrease in asset value.
However, if a company does not carry out asset management, it cannot know what has happened to its assets, whether they have experienced depreciation or profit. If the company’s assets experience depreciation, the related team in asset management must make asset management. In addition, there is also a report that must include data on depreciation in the financial statements, which will then be considered in the steps to be taken.
From a financial point of view, asset management can be recorded by compiling a company budget, for example, construction, purchasing, and maintenance of goods. From this record, it will be a consideration for the company in making decisions to purchase new assets to save expenses.
As explained above, asset management also goes hand in hand with risk management. This is because the company also needs to consider the risks that will come in the future or those that may threaten its assets.
Asset management is beneficial and makes work more accessible in compiling financial reports. The finance department requires data to be attached when reporting the Corporate Income Tax Return at the end of the tax year. Assets owned by the company also affect the calculation of income tax that must be registered at the end of the tax year.
Stages in the Asset Management Cycle
In carrying out asset management, several cycle stages will occur, including:
1. Planning for Asset Requirements
The first cycle is to plan the company’s asset needs and make a management plan for both the short and long term. This includes provision, maintenance, inventory, and other conditions. This process aims to minimize losses and increase profits.
2. Asset Procurement
The company will then procure assets by buying goods or services according to the company’s needs. This can be done personally or through another party to provide the support.
Furthermore, in this stage or cycle, the company will carry out an inventory process, such as recording and checking the quality and quantity of assets. In this cycle, it is necessary to pay attention to several conditions, such as assets in good physical or non-physical condition and juridical or legal.
4. Legal Audits
The next stage in asset management is a legal audit or legal, due diligence. This cycle examines ownership status, procurement procedures, system, and flow of asset transfers and finds solutions if assets get caught up in legal issues.
5. Operation and Maintenance
In this cycle, each asset owned will be used to carry out tasks and work according to its function to achieve company goals and carry out maintenance to be used in the long term.
In this cycle, the company will determine the value of the assets owned to find out in detail the value of the assets owned and the history of assets that have been transferred or written off.
If an asset is considered unprofitable and will be written off, then this process is divided into two parts, namely:
- Transfer of assets is the transfer of rights and responsibilities, authorities, and utilization of a work unit to another work unit within one’s environment. For example, equity participation, grants, and others.
- Asset destruction is an act of destroying or destroying assets to reduce assets because they are considered to be no longer being used.
8. Asset Renewal
After an asset has been used for a certain period, the value or function of the investment may experience depreciation. Assets not considered productive can be renewed to be used again until their economic life ends. This renewal or rejuvenation is carried out as repairs or replacement of spare parts so that the assets can work as before.
Tips for Doing Company Asset Management
In carrying out asset management, several tips must be considered so that mistakes do not occur in your business. Here are tips on doing asset management:
1. Monitoring or Checking All Owned Assets
When starting asset management, the company needs to check the value of the assets it has routinely. This check can be done to avoid the risk of unexpected expenses due to the burden of unrecorded asset ownership. An example is carrying out inspections every month so that the company does not have to pay taxes on cars or motorcycles that have been damaged.
2. Understand the Life Cycle of an Asset
You need to understand the asset life cycle, which can make it easier for companies to manage and use their assets. In addition, companies can also save time in making decisions to update or delete assets.
3. Create a schedule of incoming and outgoing cash flows
A company must have a lot of cash flow and outflow, so it’s no wonder people often forget that this is related to its total assets. But to keep it under control, you can make a schedule that shows when cash flows in and out. This schedule will help maintain the balance of cash assets and business liabilities.
4. Determining the Person in Charge of Assets
In a company, of course, asset owners cannot continuously monitor the condition of their assets. This is because many other obligations and businesses must develop, limiting one’s time in supervising assets. Then the purchase or company owner can choose someone to take responsibility for the company’s assets.
5. Study Asset Depreciation
Depreciation or depreciation of assets is an essential point in carrying out asset management. That way, the company can avoid and facilitate decision-making when help cannot be used optimally.
6. Use Smart Set Management Solutions
At present, of course, there have been many technological advances that can help the process of managing company assets. The asset management process no longer needs to be recorded manually because there is already a company asset management information system, so you can do wealth management more easily without having to flip through thick paper.