Get a Grip on Assets

Few companies know the true cost of their assets — from property, plant and equipment to intellectual capital. Some don't even know what they own or where major assets are located. Here are suggestions that can help stop the insanity.

In today's corporate environment, revenue is in the spotlight. Sophisticated business intelligence systems track income patterns. Customer relationship management (CRM) software monitors customer behavior, and sales-force automation (SFA) tools streamline the sales process. But when it comes to less-glamorous functions like managing and tracking assets, many businesses are satisfied to grope around in the dark.

"Over the last few years, organizations have made significant investments in their infrastructure and assets," observes Alfred Sanders, a senior manager for KPMG Consulting in New York City. "Unfortunately, there is a limited understanding of what all these assets provide, what kind of return they bring and their actual cost to the organization. The lack of knowledge about assets is costing companies a great deal of money and efficiency."

Corporate assets include everything from property, plant and equipment to software, mobile and wireless devices, finished products in inventory, employees, customers, and even business partners. If a company doesn't measure costs and return in all of these areas, it can't operate at peak efficiency and finance can't button down the bottom line. Of course, tracking a business's full spectrum of tangible and intangible assets is a complex proposition, one that's been complicated recently by the rapid rate of mergers and acquisitions. However, by using the right asset management software and techniques or turning to an outside service provider, organizations can gain a solid understanding of what resides within their four walls, what they have rolling on the roadways and what has slipped just under their radar.

"The goal with asset management," says David Boulanger, a research director at AMR Research Inc. in Boston, "is to use it as a proactive tool to drive down costs and manage existing assets more efficiently. The more information an organization has about fleet expenses, computers or anything else, the better it can manage them."

Although many enterprise resource planning (ERP) systems and an array of specialized applications are designed to monitor various types of corporate property, it's up to the people within the organization to devise procedures that tame the daunting task of comprehensive asset management. Companies often have assets scattered across the globe, and many recognize that they need methods outside the realm of traditional accounting for tracking and valuing these far-reaching portfolios. Finance departments must develop new strategies to maximize the efficiency of everything their company owns.

Effective Processes

Companies can generate substantial savings through the right asset management procedures. One basic way to save money is to make sure managers know key dates, such as lease terminations, maintenance-contract renewals and deliverables' due dates. Another is to ensure that accounting systems are tracking various assets effectively and providing accurate purchase order and invoice reconciliation.

Unfortunately, finance departments and business unit managers rarely take the time to manage assets proactively. As a result, companies wind up paying license fees for software they no longer use, getting double-billed for services across departments, and shelling out extra money for month-to-month leases on equipment when long-term agreements would net considerable savings. These types of problems are especially common in companies involved in a merger or acquisition.