Managing assets: A challenge to businesses

Businesses struggle to acquire assets to enable them to generate revenues, and offer services they require to meet business objectives. Business assets vary from physical or tangible assets such as buildings, land, equipment, machinery, computers, vehicles, inventory, and cash and intangible items, such as trademarks, patents, copyrights, software, and intellectual property.

Business assets are important resources that contribute to the financial health of a business. Proper management of these assets is crucial to ensure the business’s success and sustainability. Although our focus is on businesses, asset management is crucial to individuals, government, and private sector institutions regardless they are profit-oriented or non-profit-oriented. Non-organized institutions may have huge problems in assets management than formally organized institutions with boards/trustees and with well-institutionalized governance systems.

One of the performance measures of a business is how well it utilizes its assets – in relation to the sales and net profit generated. While this measure is quite broad, one may analyze a specific asset’s contribution to the business’s total return or profit.

Lenders and business partners may analyze the assets held by the business including the status of the assets, and how they are managed to provide benefit to the business before they lend or invest. In the past, we consulted an institution – for analysis on how they manage assets and found that they had 12 cars for lease, but they only had 5 drivers.

On average one car traveled only 4,000 km per year. If a hired car travels a distance of 200km a day for town trips. You may note that for this organization on average, a car traveled for only 20 days in a year! There are several other examples where businesses have lots of unknown debtors, acquired land – which is scattered across the country, machines, motor vehicles, buildings, patents, computers, software, and several other assets which are not in use, not knowing who hold such assets.

Asset management may be the responsibility of the financial manager or a specialized person – The Assets Manager or the Owner of the business. The responsibility depends on the structure and size of the business.

Managing business assets involves a variety of tasks, including first and foremost, establishing asset management policies regarding various types of assets, tracking inventory, tracking moveable assets, maintaining equipment, and managing financial resources. Although there are specifics on how certain types of assets are managed e.g., financial assets, inventories, and accounts receivables, generally, the following can be a starting point for managing physical assets.

  • Create an inventory/ Asset register: This is a comprehensive list of all the business assets, including equipment, vehicles, buildings, land, software, computers, and financial resources such as cash, investment in securities, debtors, etc. It is important to know the value, location of the asset, and date of acquisition. This will help the business keep track of the assets it owns and identify areas that may need improvement. Businesses can develop or acquire and customize software that may help to manage their assets. Some accounting software has asset management modules. Some assets need to comply with various legal provisions such as insurance, maintenance, and several others and hence software will help to track and keep the business informed.
  • Assign responsibility: Assign specific people to be responsible for each asset. This helps ensure that the assets are properly maintained and cared for. I realized that it is easy for business owners to assign a motorcycle worth 3m/- to a driver/salesperson who will ensure that it is fit for the road, give a daily or weekly report on the whereabouts and usage of the motorcycle; and leave out assigning a responsible person for a building worth TZS 500mil or 100-acre land.
  • Develop a maintenance schedule: Develop a schedule for regular maintenance and inspection of all equipment and assets. This will help prevent breakdowns and ensure that assets are in good condition.
  • Monitor usage: It is important that businesses should track how the assets are being used and how frequently they are being used. It is easy to track a car by putting up a travel log book than having a log book for a building/machinery/piece of land worth more than the car. Tracking assets may help the business to identify areas where it may save money by reducing unnecessary usage. It may also identify if the business has excessive assets, which does not contribute to its core business.
  • Consider outsourcing: Consider outsourcing some aspects of asset management to specialized service providers. For example, you may be able to outsource the maintenance of specialized equipment to a business that specializes in that area. It is quite obvious that the business may find specialized service providers for maintaining air conditioning systems or photocopiers than maintaining their equipment/ machinery or even landed properties or regular basis.
  • Implement tracking systems: Use tracking systems to keep track of assets. This can include GPS tracking for vehicles and financial tracking software for managing investments. With technological improvements, tracking systems are becoming cheaper. Business find it worth spending 30,000/- per month for data and internet per employee than spending same amount to track a valuable asset such as a motor vehicle.
  • Review regularly: Regularly review your asset management practices to identify areas for improvement. This can help you optimize your resources and improve your bottom line. Depending on the type of organization and assets, reviews can be on daily, weekly, monthly, or quarterly.

Managing business assets requires a proactive approach and a focus on short-term and long-term goals. By implementing these steps, you can help ensure that your assets are properly cared for and that your business is able to operate efficiently and effectively.

Author: Dr. Tobias Swai is a Senior Lecturer and Head of the Department of Finance, at the University of Dar es Salaam, Business School. Email: tobias@udsm.ac.tz Telephone: +255 754300 495.

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