“The more material we lose, the less we have. The less we have, the more we win.”
― Anthony Liccione, Author & Poet
Why do we need Assets?
Any business needs assets to keep the operations running smoothly. These are critical as they help generate revenue, add to the business value. The additional benefit is that one can monetize assets, help reduce tax liabilities, and make your business more efficient by using better equipment.
It is important to clearly understand the cost benefits of a particular business asset thus ensuring that one gets a better return on investment. Owning assets may not always be a wise thing, at times it one may be better off leasing them.
Also at the end of the day, the whole point of owning assets is to generate business. Metrics like the Fixed Asset Turnover Ratio are used for measuring this. A higher value on the fixed asset turnover ratio tells you that the business has been able to effectively use its fixed assets to generate better sales.
Regardless of what kind of ownership of assets one has, one should also ensure that these don’t add risks like safety, health or breakdown of operations due to failures.
Types of Business Assets
There are various types of assets. Business assets are broadly classified into two categories viz Tangible and Intangible Assets.
1] Tangible assets
Assets that are physical and real are considered Tangible Assets, like machinery or a computer that you use for business purposes. Typically business properties and real estate, business equipment and tools, machinery, furnishings and even long-term investments all fall into the Tangible asset category.
These Tangible can be further classified in two categories viz Current and Fixed Assets
All the business resources contributing to the overall value of a business can be regarded as Current Assets. These assets are either consumed or converted to cash typically in a year or so. These vary from inventory, accounts receivables, prepayments, cash-on-hand and held in the bank and even the money owed by trade debtors.
Fixed assets are, on the other hand, those used in the business operations and are expected to depreciate in their value but these are not with the purpose of converting into cash. Although these can be liquidated but under dire circumstances. Some fixed assets can not even be liquidated due to the criticality without which the operations can not run.
2] Intangible assets
Intangible assets have no physical existence nevertheless they are important for the business. Intellectual property, trademarks, patents, trade secrets, domain names, databases, brand name and knowledge.
While intangible assets cannot actually be listed in a balance sheet or liquidated in cases of emergency, these assets are intrinsically valuable and augment the overall credibility of the business.
Intangible assets may come in handy if ever the business’ reputation becomes at stake or when the need for a platform shift arises. For example, if a publishing business has a solid reputation among its customers, it may encounter lesser problems as it decides to shift from print to digital as compared to a business with a reputation of lesser quality.
Fixed Assets Examples
Typically fixed assets are those assets which the company plans to use on a long-term basis – technically speaking at least for a year. Typically fixed assets are labeled as the PPE (Property Plant & Equipment). What normally fall into this category of assets are the buildings, equipment ranging from factory machinery to computers, land, the plant premises, etc.
The fixed assets are not considered as part of the inventory. The products created by the company would become the inventory as these are assets expected to be converted into cash in the coming months. Thus fixed assets have their cash value but the intent is not to encash this value.
Fixed assets are in some sense true long-term assets of a company. Critical assets which are so core to the operations like the buildings, equipment, machinery and business vehicles that can not be liquidated.
The value of the Fixed assets keeps depreciating and hence the value too decreases. The overall value is provided by the metric Net Fixed Asset calculated as below:
Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation
Lesser the value of Net Fixed Assets older the assets one owns, this becomes important in deals like an M&A, where the other business is interested in a stake due to the perceived value owned by the company.
Fixed Asset Tracking benefits to Industries
Every industry can benefit from fixed asset tracking. Some industries typically might have more fixed assets to be tracked than others making them more suitable or benefitting more than others. Let us look at some of such industries:
This is one industry where there is a need for many fixed assets like various equipment, generators, oxygen cylinders, ambulances. These assets are very important and critical hence their availability and knowing where they are at any point of time is also as important to ensure that emergencies are taken care of in a timely manner. In addition, it would also help to handle any compliance requirements.
Creating a product needs a lot of fixed assets like manufacturing equipment, tools, vehicles for transport, warehouses, pallets, buildings, etc. All these assets would need to be available for efficiently running the operations. It may not be life-critical but nevertheless, delays would be loss of money and business.
This is another industry where fixed assets are essential and core to the business. The basic tracking of the items or assets may be critical or costly. It could be that a lot of assets may be difficult to move and some easy to move like a bottle of Isabella Islay, but the ability to track them at any given point would be a dream come true for the business owners.
Challenges of tracking fixed assets
Some of the fixed assets are immovable and hence may not need continuous tracking e.g property or even a plant. Spreadsheets have been typically the go-to tool for any kind of tracking especially those of assets since they come with the ability to add calculations and formulas into the sheet making it easier to use this information collected. However, the bigger issue is that of the accuracy of this information. It is accurate as to the date and time the information was collected, beyond that it would be difficult to say if the assets are truly available wherever they have been recorded to be in the excel sheet. It is natural that with time these inconsistencies would crop up rendering the information obsolete and tagged as on a certain date and time.
Notwithstanding these issues, the information is not secure since anyone having access can edit the information and are also prone to human error.
This type of manual tracking is very time-consuming since one tends to spend a lot of time doing the physical audits trying to identify, locate and document the assets. Repeating this exercise can be taxing on the operations since it may need assistance from the ground staff during audits.
Another major issue here is the lack of an audit trail. If the equipment was moved around the place and is back in place during the audit, it would not get tracked as to which locations the equipment would have moved around to before getting returned back to the original location. Thus missing on the inputs as to how long the equipment got used and by whom.
The most common practice of asset tracking is that of using barcodes or QR codes. This is definitely with the advantage that one would easily know and track the equipment more accurately and quickly than manually doing so. This practice has many challenges that sometimes the scans are inaccurate. Also, it is person-dependent and one may miss scanning an asset thereby missing to track it.
How to track Fixed Assets?
As discussed above there are multiple challenges that are currently present in tracking assets.
Some of the characteristics that one would want in a fixed asset tracking system have been outlined below, these would help alleviate some of the challenges listed above:
- Ability to track continuously the location of the assets
- Accuracy of information
- Protection against theft
- Ability to provide an audit trail of the movements and locations of the assets
- Ability to provide information on unauthorized movements of the assets
- Ability to provide information relating to the maintenance schedules of assets
- Ability to define boundaries where the asset is expected to be located
- Ability to trigger alarms when the assets leave their expected locations or are in a location that may breach security
A tracking system with such features would be able to also give some advantages like
- Provide sufficient data to prevent any liability in case of an accident or weather-related disaster
- Proof that regulatory compliances have been followed
- Instant knowledge of various inputs like the maintenance schedule, manager responsible
- Ensuring that the climatic conditions under which the asset was stored meet the standards prescribed by the manufacturer.
The Asset Tracking Solution offered by Quicsolv comes as a fitting answer to the needs of such a system. The solution is based on Bluetooth low energy (BLE) technology. The solution provides real-time tracking of the assets. The solution is simple to implement as it needs very few additional fittings which can be easily fitted and assets that need to be tracked are fitted with an asset tag. Additionally, the system requires very little maintenance as it is based on parts that are rugged and have long battery life.
The solution is scalable and can be integrated even across multiple locations. The solution also provides a framework for more systems to be implemented like that of an employee tracking system. Thus it provides a better ROI as both scope and scale of the solution can be expanded!!
The importance of tracking fixed assets is undeniable, especially where these play pivotal roles in the business operations or form a high-value asset. The extent to which this tracking would need to be implemented is based on various factors and would need some drawing of lines. Talk to us and discuss your business scenario to explore and understand possible solutions.