Property Management Standards – Part 2
Guest Contributor: Amanda Watkins
Today I’m going to briefly touch on three standards: Standard Practice for Assessing Loss, Damage, or Destruction of Property; Standard Practice for Physical Inventory of Durable, Moveable Property; and Standard Terminology for Property and Asset Management.Most people and companies have insurance. It’s a smart investment for any organization, regardless of the quantity or cost of their assets. Many will think that dealing with loss, damage and destruction (LDD) will start when they have to turn in a claim to their insurance company. But in the property management world, knowing your LDD projections ahead of an event can save your company money. That being said, it’s easy to see how the LDD standard is applied to our discussions of business continuity and disaster preparedness.
LDD is an indication of the effectiveness of property operations in a company. Excessive LDD is an indicator of poor management, little control and possibly lack of compliance. Preparing for and projecting the probabilities of LDD is essential in assessing and managing risk in any organization. Having projections ahead of time for your potential LDD will set acceptable levels of loss, damage and destruction. Every company expects to have some LDD, but you need to determine how much loss is acceptable for your organization. Are you a multi-billion dollar company that expects to have a LDD every year of ~$100,000? That’s not so much in the scope of the company’s assets cost and ROI. But if you are a small company that brings in $200,000/year, then $100,000 LDD is a lot for your company. Addressing and reporting on loss, damage or destruction of tangible property is the first step to managing and minimizing LDD. This is a critical standard to establish the economic success of the company.
The next standard I want to discuss is the Standard Practice for Physical Inventory of Durable, Moveable Property. Sounds pretty self explanatory but there is a lot that goes into planning and executing a physical inventory. We have discussed how to do a physical inventory before but today I want to focus on why.
A physical inventory is going to:
- Determine the accuracy of your existing records and update them
- Assess losses, damages and destruction that has occurred since the last inventory/audit
- Help identify and raise discussion/instruction on processes and assess what is/is not working
- Report on quantities on hand and identify shortages
- Provide preventative measure against theft, damage, misuse and loss if people know they are responsible for the assets and have to report on their location and status at regular intervals
- Update records to include new, un-inventoried items
This all contributes to the concept of total asset visibility, which is an insight into what fixed and mobile assets you have, where those assets are located and who is accountable for those assets. Total asset visibility is essential for maintaining an effective asset inventory. Most companies or agencies will have their own set of necessary data and accordingly, will develop their own, customizable protocol for tracking that highly valuable information. Not everyone uses an asset management system but having some kind of system in place, some guidelines at least, are recommended so that there is a workflow for the inventory process.
Lastly, I’ll review the Standard Terminology for Property and Asset Management. Basically, this standard will list out the terminology every property manager should be familiar with. This can become quite a large document as terms evolve and new ones are added constantly. If you are ever unsure of a term, check with ASTM, or the NPMA. Becoming familiar with a lot of the standard terminology is something that comes with use and experience. But without a doubt, it’s always best to ask if you’re unsure of something. As our teachers used to tell us, there’s no such thing as a stupid question.
So those are the three standards for today’s discussion. Leave us a comment and tell me what your take is on these standards. Are you familiar with them? Have you had to reference them in your property management? How do you handle Terms, LDD, and Physical Inventories?