Shape Your Business logo
Follow Us:

Get The Best Return On Investment From Your Assets

Wednesday, April 14, 2010   By Mike Reddy

 

Every business, large or small, has assets that help them perform their work, or deliver the services they provide, to their clients. These physical assets represent a significant monetary investment for even the smaller business. Curbing operating costs and maximising asset productivity-asset management-is vital to achieve a greater return on your investment in assets.

Tracking assets

Having an accessible record of the details of individual assets is a necessary basis for managing them. There are a number of asset tracking software solutions available specifically designed for the SME. Operating off a database of assets and utilising such technologies as barcodes, radio frequency ID devices (RFID), wireless smart tags and GPS, they can track anything from a fleet vehicle to a computer to a spanner. The database stores all the lifecycle details of any item such as its purchasing, leasing and invoicing details, physical location and, where relevant, which employee is in possession of it.

In trade occupations it’s not unusual for tradesmen to lose or damage tools and machinery on the job. Often they simply draw a replacement piece from the storeroom. Though each loss or repair may be small, the cumulative effect can be great. Asset tracking software adds an element of accountability, and encourages a greater degree of responsibility, in the use of company materials. Assets can be instantly located, eliminating wasted time spent searching for them, and unnecessary expenditures to replace supposedly lost items.

Businesses that employ an asset in different departments within one unit can use asset tracking to improve utilisation rates and possibly avoid the need for duplication.

Improving asset performance

In managing equipment over its lifetime SMEs typically adopt a run-to-failure “strategy”, predicated on the facts that they probably know little about how the equipment functions, and they don’t see the value in investing time and effort into a regular maintenance regime. This approach is counterproductive - unplanned and reactive maintenance places a significant cost burden on businesses, one that is rarely fully understood or recognised by management.

Frequently an individual production unit may be the only one available. With no redundancy capability asset downtime and failure are very quickly reflected in bottom line results. Planning and management of asset maintenance increases the life cycle of the assets and keeps them performing at peak productivity levels.

Servicing manuals, pictures, quick-fix tips, warranty contract, maintenance history and vendor and repairer contact details can all be attached to an asset’s record in the asset database. Providing one central location for the information can get a down machine up and running again, with minimum loss of time. This can be critical in avoiding costly fines now that broken equipment can have occupational safety and health, and environmental protection consequences, on top of reduced productivity.

Though rarely recognised by SME managers, an ongoing maintenance programme for assets is a strategic issue that translates to a significant contribution to the business’ profit margin. Likewise, employees fail to recognise the importance of asset management and don’t log problems with their machinery until it fails completely. Asset management software simplifies the process of developing a proactive system of asset management that incorporates real time logging of problems by operators, regular maintenance and early replacement of failing components.

Improved management visibility into the location, use and performance of assets has enabled progressive SMEs to shift from a short term, situation-reflexive model of asset management, to a more strategic long term programme that ensures they derive the maximum return on their investment in assets. A streamlined asset management system will reduce asset loss, operating costs and downtime so as to minimise asset total cost of ownership.


Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.