Top 3 Cost-Saving Advantages of Asset Management Software
As a property manager, you probably remember when you first realized that Property wasn’t your company’s highest priority.
First, you noticed you were being left out of meetings… Then your budget was slashed! Your support system, severed!
All because the higher-ups didn’t understand the importance of asset management.
That’s why it’s vital you make it very clear to upper management why the property department deserves the support it needs.
To do this, you should communicate the importance of your duties in a way that aligns with leadership’s priorities. So today we’re going to focus exactly where they focus: profit.
Luckily for us, the primary goal of asset management software is to increase profitability. It largely does this through cutting costs and increasing efficiency.
NEWEA states, “There is evidence that asset management systems that maintain infrastructure in a sound and reliable condition and are based on minimizing life cycle costs, can significantly reduce operating and maintenance cost, as well as long-term capital expenses. A life cycle approach means that the utility always gets the most assets for its money.”
Let’s explore in detail how asset management systems improve each of these aspects.
1) Decrease operational costs
When integrated with operations, an asset management solution can decrease overall operational costs. But how exactly does it do this? Generally, this is seen in increased operational efficiency, as well as improved maintenance performance.
Asset management operations
Asset management software increases operational efficiency by making assets easy to find. The user can quickly search the software to determine where an asset is located, even down to the shelf number. This is more efficient than often-inaccurate manual entry databases, or searching for the asset by hand.
Many asset management systems can improve your maintenance performance and decrease associated costs.
Industry sources agree that preventive maintenance is often financially smarter than reactionary maintenance. This is because preventative maintenance, like its name suggests, prevents problems before they occur. When performed correctly, this allows operations to continue without disruptions, increasing production. It can also prevent equipment breakdowns and more costly problems caused by neglect.
Asset management software can make performing preventative maintenance easier. As in other operations, maintenance becomes more efficient when workers can quickly locate assets. Some asset management systems also allow you to streamline maintenance tracking and scheduling.
2) Achieve regulatory compliance to eliminate operational risk
While regulatory compliance isn’t always top-of-mind when it comes to business finances, complying with requirements allows your business to avoid harsh fees for noncompliance.
Noncompliance can be costly for any business, large or small. Boeing, for example, recently ran into trouble on the government contracting side of its business for Foreign Object Debris in their deliverables. Mismanaging these small assets led to big fines for Boeing.
How does your business avoid noncompliance? On top of performing industry best practices, utilizing comprehensive asset management software is a great step to meeting government requirements. It is easier to pass inventory audits and other compliance assessments by using strong records from your asset management software.
3) Reduce liquidity risk with efficient asset management
Liquidity risk is a common issue for asset and inventory management.
But what is it? In their guide on liquidity, Bench says: “Businesses with high liquidity risk are at risk of not being able cover their short-term bills and liabilities.”
Bench goes on to note: “Companies usually develop liquidity risk when they’re not carefully managing cash flow, not selling enough inventory, or depending too much on loans to grow their business.”
Liquidity risk increases when a company has excess inventory that they’re unable to sell. With a well-established asset management system, you know what assets you have and what assets you need to purchase. This reduces your business’ liquidity risk by decreasing the amount of non-liquid assets you have on hand.
But wait—there’s more!
While I only went into depth on three potential cost saving factors, there are many ways that asset management software can increase profitability. These include:
- Reduced capital and expense purchases
- Reduced depreciation expense
- Reduced property insurance costs
- Increased cash from the sale of excess idle equipment
- Reduction in materials and parts to support test equipment
- Reduced sales and property/personal property tax
- Reduced purchase order processing costs
- Reduced inventory expenses
- Reduced warehouse facilities square footage and costs
- Reduced acquisition and sales costs
- Eliminated emergency lease requests and expensive lease payments
Alright, that was pretty dense. Hopefully we didn’t lose you in the weeds, because all of the hefty information above will be useful the next time you need to justify a big expense or make a radical change at work.
And if we’ve inspired you to speak with your senior leadership about asset management software, we suggest you take a look at our white paper on choosing asset management software. This way, you’ll be prepared if they say “yes.”