Strong asset management can strengthen your business - it puts fixed and current assets in order, ensuring easy retrieval and liquidity. This is why we've compiled this introduction to asset management, including some examples.
Asset management defined
Asset management in finance means the administration of investment portfolios. The assets within this portfolio will be overseen by an investment bank or an individual asset manager, who will try to lessen risk and increase value. Investment services include a variety of solutions geared toward these goals, including equities, real estate, commodities, and mutual funds.
Asset management can also refer to asset management software or other internal systems used for a business's asset management strategy. Internal or digital asset management systems have the same aims as investment services: to help users better manage their assets: mitigate risk, recover assets efficiently, increase the rate of return, track performance, measure life-cycle costs and promote economic growth.
What is the benefit of asset management for my company?
Assets in an organization increase as the company grows. To ensure that they are being utilized correctly, it's critical to know the present value of all the assets in your company. It's also critical to check the value of assets on a regular basis to verify that all financial reports are correct. Eg when an asset is lost or stolen, this should be noted so that the books can be updated. Asset management also helps in the identification and management of any associated risks for a business. Other advantages of asset management include:
- Asset managers can identify wasteful and inefficient purchases by tracking the company’s assets from the beginning to end of their life cycles
- Managing assets required for a business's performance can help reduce expenditure - if you manage assets, you will know what equipment is exactly needed
- Businesses are required to provide detailed reports about the acquisition and disposal of assets to relevant government agencies. Keeping all of this data in a centralized asset management system makes it easy to generate reports.
High-end asset management companies: Asset management accounts are supported by an individual advisor - you will be able to access a range of existing investment options for the optimal asset management plans. Asset managers at eg BlackRock or Fidelity Investments will look at different aspects of asset data, such as your tax situation, liquidity needs, and income requirements.
Mid-range asset management companies: Specialised in smaller investors, these companies look at options like mutual funds to pool together resources. As tax structures or asset placement are not as pressing for smaller investors, they can focus on putting work in a central investment portfolio.
Digital asset management: If you are more comfortable with in-house asset management, digital platforms and software solutions can be a good option. They use algorithms to manage portfolios - tracking software can also be used as a central database of your existing assets.
Individual asset managers: Registered investment advisors outsource the management of their portfolios to a third party while providing bespoke advice.
Create your strategic asset management plan
Here is our step-by-step guide to follow when creating a plan for your asset systems:
Step 1 - Undertake an asset inventory.
Before you can invest your existing assets in a more cost-effective manner, we strongly recommend you should improve your inventory management. The complete inventory of your company's assets should include the following information: total number of assets your company owns, where they’re located, the current value of each, and when they were acquired.
Step 2 - Identify each asset life cycle.
It is key to know about the life-cycle costs of each asset, particularly for eg computers or other assets whose value decreases significantly over time. Being aware of lifecycle costs helps your business plan for maintenance and disposal. Also, consider service costs for those items.
Step 3 - Define your company's financial objectives.
Finally, you can get into financial planning. Whichever form of asset management support you choose to go for, you need to put a solid plan in place to mitigate risk and increase value.