What Is Fixed Asset Management Software?
July 4, 2022
Assets can be classified into various types, such as fixed, financial, tangible, intangible, current, and non-current. This guide will talk about a specific category of fixed assets and how to manage those assets with fixed asset management software.
Fixed assets are assets from which a business derives economic value over the long term. They can be tangible (such as land, building, and machinery) or intangible (such as patents and copyrights).
In the context of maintenance, however, “fixed asset” refers to fixed tangible assets like machinery and equipment. These assets are essential to maintain and keep running because they impact profitability. So, for example, investing in a machine with modern technology might help improve production efficiency and contribute to the company’s bottom line.
The most common examples of fixed assets include:
- Buildings (factory, office, and other structures)
- Vehicles (trucks, vans, and other vehicles)
- Equipment (machines, computers, and other components)
- Furniture (cabinets, chairs, and other furniture items)
What Is Fixed Asset Management (FAM) Software?
Fixed Asset Management (FAM) is the process of tracking, monitoring, managing, and maintaining fixed assets.
Fixed assets can require a large capital outlay and depreciate as they are used (except in the case of land) over their useful life.
You can calculate depreciation by dividing the costs of an asset by its estimated useful life.
Depreciation =Cost of Asset ÷ Estimated Useful Life
One way to estimate useful life of an asset is to guess based on prior experience. Another way is to consult IRS Publication 946, Appendix B. This publication provides useful life estimates by industry and application.
Here’s an example:
An asset valued at $60,000, with a 12-year useful life, depreciates $5,000 per year (assuming the straight-line depreciation method).
That is $60,000 ÷ 12 years = $5,000/yr.
However, if the same asset has a useful life of 10 years, the machine’s value will depreciate by $6,000 yearly.
At some point, the asset will stop operating, and you’ll need to replace it. So, the longer you can derive value from an asset, the more your return on investment will be. And this is where FAM helps.
Using Fixed Asset Management (FAM) Software
With Fixed Asset Management, you can:
Extend Asset Lifespan
Tracking, monitoring, and proactively maintaining an asset as part of your preventive maintenance (PM) program helps minimize breakdowns and extends its life.
Improve Machine Uptime
When you have a robust physical asset maintenance program, you can improve machine uptime and work towards achieving production efficiency.
Optimize Asset Utilization
Tracking your machines and their performance helps you discover issues early on, allowing you to track asset life cycles and take quick actions to fix the issue and improve your Overall Equipment (OEE) scores.
Stay in Compliance with Regulations
Some industries require fixed assets to be tracked and monitored regularly. For example, if your machine emits harmful gasses or waste, OSHA or the EPA (Environmental Protection Agency) may require you to monitor your assets to keep emissions under control.
View Real-Time Financial Data
Having real-time financial information about your assets simplifies financial accounting, calculating depreciation, and preparing budgets.
Common Pitfalls to Avoid with Fixed Asset Management
You may find yourself facing several challenges when you undertake FAM. Keep an eye out for:
- Errors in data entry: If you’re collecting data and entering it into a spreadsheet manually, there’s always a risk of entering it incorrectly.
- Data management: If your company has many assets, you’ll need to collect, manage, and monitor a lot of data, which may become overwhelming and hard to read via spreadsheets and paper copies.
- Lack of robust tools: If you manage data on a spreadsheet, you won’t have access to real-time actionable reports and insights. You may end up spending time you don’t have manually migrating data across business apps.
- Data security If you’re storing data online, you could become a target of a cyberattack and lose access to your data. Or you may find yourself tied to one computer with all the software and secure data.
“New technologies yield vast maintenance efficiency potential for industries with distributed fixed assets. Companies that have digitized and automated their maintenance processes now show a significant increase in labor productivity and a 20 to 30 percent reduction in maintenance costs.”McKinsey
Fixed Asset Management Software Best Practices
Best practices ensure you’re not leaving any loose ends when managing your assets and that all equipment is in working order. Here are four best practices to follow before your start FAM:
Determine the Scope of the FAM Program
If you’re a large enterprise with many assets, start by determining the parameters you want to track for your assets. Unfortunately, tracking and monitoring all parameters and data points can paralyze your FAM program with unnecessary information.
You can keep your FAM lean by determining its scope before you start collecting data. Then, list the most critical parameters and focus on tracking those. Doing this will make interpreting data and detecting issues easier.
Audit for Ghost Assets
Ghost assets are assets that appear on your balance sheet but are missing from your premises, are in an unusable condition, or have reached the end of their asset lifecycle. These assets skew your asset management data and also have financial consequences.
For example, if you have an unusable asset on your books and you’ve insured all your physical assets, you’ll likely be paying an insurance premium for that asset.
A physical asset audit helps you identify ghost assets and takes them off your books and the FAM tracking list.
Once you’ve found the ghost assets, record those changes in your books. You should also invest in a robust asset inventory management system if you don’t have one already so that you can manage your asset inventory more efficiently.
Set Up Asset Identification and Tracking Equipment
When you have many units of the same type of asset, it’s hard to track them unless you have an identification tag on those assets. Location tracking is crucial for fixed assets spread throughout facilities, for example.
If you use a CMMS (Computerized Maintenance Management Software), you can add asset tags, such as QR or barcodes, to assets that you want to track. With MaintainX on your mobile, you can scan QR/barcodes from anywhere in the field.
This way, you’ll always have complete visibility over your assets. And you’ll find it easier to identify assets when you need to in the future.
Deploy a CMMS
Spreadsheets are inefficient for managing fixed asset maintenance data. Sure, you can manually insert data and create a depreciation schedule on a spreadsheet. However, a computerized maintenance management system (CMMS) or Enterprise Asset Management (EAM) software is much more powerful.
Digital solutions help you make data-driven decisions by providing you with comprehensive information. For instance, a CMMS will provide information on whether an asset is still under warranty and flag unexpected breakdowns.
A comprehensive EAM (Enterprise Asset Management) software might make sense if you’re a large enterprise. But if you’re a small- or mid-sized business, consider a modern, mobile-friendly CMMS like MaintainX that offers many of the same asset management features as an EAM solution. In either case, choose a software vendor with good customer support and the functionality your business needs.
Fixed assets are often the most valuable assets a company owns. Tracking, monitoring, and maintaining those assets to extend their life can significantly increase your return on investment on those assets.
Working on fixed asset management, taking a proactive approach to maintenance, and using a robust CMMS as an asset management system is critical for ensuring that your fixed assets operate safely and efficiently for their useful life.
And if you’re looking for an easy CMMS solution to manage your fixed assets, give MaintainX a try. Sign up for a free trial today!