Surviving the slowdown
How asset management can help
Economic forecasts are gloomy. The CBI has downgraded its economic forecasts for 2008 for the third time in succession . Amid credit uncertainty and surging fuel costs, businesses need to plan for an uncertain future.
In a difficult economic situation, cash is king. Anything which can be done to conserve cash and improve cash flow will put you in a much stronger position to survive the downturn.
One of the most effective ways of conserving cash – but one taken by surprisingly few companies – is to improve the control and management of fixed assets. The savings to be made in this area are massive.
According to research by KPMG, UK companies are wasting £17 billion a year because managers have not applied proper asset management concepts. Other research indicates that companies are overspending by up to 40% because of under-utilization, inefficient maintenance and petty theft of their assets Even the smallest company, with perhaps only a few hundred assets, will benefit enormously from effective asset management.
Many smaller companies use spreadsheets for asset management. It is easy to understand why. Spreadsheets are easily available and easily set up. They are also quick and easy to modify and develop. Spreadsheets are very good for ‘thinking processes’- to analyse last month’s sales figures, or do ‘what if’ projections.
But there are many disadvantages to spreadsheet systems. Spreadsheets quickly become complex and difficult to verify. They are extremely error-prone – according to some research, as many as 90% of spreadsheets have a significant number of undetected errors. Spreadsheet systems also make it very difficult to track and control changes or to produce a clear audit trail. Often undocumented they are very hard to change reliably.
Spreadsheet systems have is no built-in reporting – even standard statutory reports must be built from scratch. And with asset management, as with most business issues, the key is information. You need information about what you have, where it is, how it is being used, and how much it is costing you to maintain, repair and insure.