29 March 2017
It may sound obvious, but businesses should know what they own. However, as a business develops so does its supply chain and its whole ecosystem, leaving CFOs with the headache of understanding what belongs to the company, where, and how much it is worth to get the full picture for both tax, accountancy and operational purposes.
The purpose of asset management systems
A company asset could be literally anything: machinery, tools, vehicles, real estate, IT hardware, furniture, its inventory - or the data it owns. Most of these assets are constantly on the move, leaving them vulnerable to theft, damage or loss.
A survey by Kessler International found that 95% of employees steal from employers, whether the theft comes in the form of stolen time, theft of office supplies and equipment, theft and sale of corporate secrets and even the theft of the products and services offered by their own employers.
Tracking and managing company assets is therefore of utmost importance for finance officers, from maintaining accurate inventories for the purpose of financial accounting, to asset loss prevention and recovery, preventive and even predictive maintenance by tracking warranty and service records, theft deterrence, and, of course, regulatory compliance.
However, the most important reason why finance officers must have a solid asset tracking and management system in place is the fact that it could make a tangible difference to the bottom line.
"To manage a profitable business, the management must have information regarding the current location, use, state of repair, and usefulness of its productive assets. The chief financial officer has a duty to ensure a system is in place to provide this information," said accountancy expert Raymond H. Peterson, author of the book 'Accounting for Fixed Assets'.
A tedious and tortuous process
"There will be an increasing need for companies and, in particular government organisations, to be able to track and authenticate their in-house assets and equipment as well as items and products provided and sold," said John Devlin of ABI Research.
In this context, the asset management system market is forecast to grow annually at a rate of 15.17% between 2016 and 2022 to reach U.S.$25.55bln by 2022, according to research by marketsandmarkets.
"Asset management solutions reduce inventory and stock management cost and effectively utilise existing equipment through tracking and monitoring both in real time and non-real time, thereby helping organisations to achieve their objectives. These factors are driving the growth of the asset management system market," the report said.
Currently asset management systems such as barcode and passive radio-frequency identification (RFID) and Real-Time Location System (RTLS) solutions are widely used in the retail and healthcare industry. RTLS solutions help track work-in-process carriers, containers, valuable equipment, and personnel. They can provide real-time monitoring of the operations in an enterprise, thereby ensuring smooth production, marketsandmarkets said.
The most capital-intensive industries such as construction, manufacturing or oil & gas are likely to benefit significantly because asset tracking systems can increase asset uptime of machinery and equipment, optimising the length of functioning time, but also make maintenance more predictive and improve resource efficiency, leading to significant cost savings.
Modern challenge: tracking intangible assets
The traditional, manual method of physical asset tracking and management does not provide an accurate and real-time picture of conditions as they change. The same can be said of intangible assets. Yet the latter are increasingly important in today's digital economy. Ocean Tomo's Intangible Asset Market Value Study showed that in January 2015, intangibles comprised 84% of corporate valuations on the S&P 500 - up from 20% in 1975.
Oracle's The Digital Finance Imperative report unveiled a discrepancy between the modern, customer-oriented data and insights needed by CFOs and the fragmented and incomplete data their current legacy systems provide. A global survey of 744 executives from 34 countries revealed that CFOs simply cannot generate or find sufficient data about the customer-oriented issues they feel are most vital to their businesses.
Modernising asset tracking practices should therefore become a priority as part of the digitalisation of finance.
© Oracle 2017