As a business owner, you need certain management processes and lists in place. One of those important lists is that of your assets. Asset inventory is crucial to the smooth operations which exist in your business. To do a proper asset management inventory, you need to understand what it is and how it’s done.
Asset inventory is a comprehensive list of the assets that are owned, managed and controlled by your business. Typically this list includes important details such as names, identification numbers, description, location and the name of the owner of any assets.
As a business owner, you need to do asset inventory management to improve how you store and order any raw materials, sales goods and stock pieces that you may have.
In this article, we give you a better understanding of how asset inventory management works and how you can do it for your business.
What Is an Asset Management Inventory System/Process?
Having an asset inventory management process means you have a system in place to help you track, manage and optimise your physical and digital assets. This is done throughout the life cycle of the assets. The system is a centralised platform to help you monitor assets such as computers, machinery, software licenses and intellectual property.
Your asset inventory management system also helps you see which of your departments may need modern or up-to-date assets and which departments are well-equipped.
Types of Inventories
In terms of asset inventory management, the terms ‘asset’ and ‘inventory’ mean different things. Asset refers to stock that you intend to sell either individually or as part of a product.
Inventory can be split into the following categories:
Raw/base Materials: These are the items that you use to produce your goods or services.
Work-In-Progress (WIP) Inventory: WIP inventory is a list of unfinished products that are still undergoing production. Some may refer to WIP inventory as intermediate goods.
Finished Goods: Finished goods are the completed products from the production line that are ready for sale. These goods do not require any further manufacturing or processing for use.
Maintenance, Repair and Operations (MRO) Inventory: MRO inventory are supplies that maintenance workers need to do their work properly.
Why Is Asset Inventory Management Important?
Besides tracking and organising company assets, asset inventory management can help you with many parts of managing the business. Some of the benefits of asset inventory management include:
Refine Your Organisation
Accurate asset inventory management improves the organisation and function of your business because it helps you see any asset gaps. Using a system means you and your employees are able to see quickly which assets you need for functionality.
Additionally, the system is invaluable to your accounting purposes because it helps your finance department generate better reports on the company’s finances. By recording the value of each item, you can measure its depreciation better and thus replace it quickly.
Protect Your Assets
Having an updated list of your assets ensures that you can protect each item from theft or damage. It also helps you comply with any laws and regulations regarding each item. For example, if you need a license to own a certain type of software, you can quickly learn about that through your asset inventory management system.
Assess the Value of Your Assets
The process of asset inventory management can help you calculate the value of your assets throughout its life cycle. It also helps keep an updated record of the asset’s previous use(s). Additionally, you can track when any of your employees use the asset. This is especially important if you are manufacturing.
Advice on Your Future Investments
Through the correct tracking of your assets, you can make proper investment decisions. This ensures that when the time comes to purchase new equipment or spend money on innovation, you spend on the right areas. This is especially vital when looking at assets that will be used by the entire office such as printers.
Now that you know the importance of asset inventory management, you just need to know how to do it.
How To Conduct Asset Inventory Management
Conducting your asset inventory management can be done manually or you can utilise an existing platform. To effectively manage your inventory, follow these steps:
Step 1: Assess What You Have
The first step is to go around and assess your inventory. This means jotting down every single asset you have whether it’s equipment or software. Once you have done this you can move on to the next step.
If you have software to do it for you, you must ensure that the system is working effectively to record your assets. If you decide to do it manually, you will need to update your records consistently.
Step 2: Review What Assets You Had
The next step is to review the assets you had before. This includes using your previous inventory list to compare the assets and the numbers. During this stage, you should consider the following:
- Are the inventory numbers the same?
- Have the inventory numbers increased or decreased?
- Is there any stock which is present that shouldn’t be present?
- Is there any stock present that is not selling?
Step 3: Analyse Your Sales
During your comparison of inventory lists, you need to review your current sales data. Using your current inventory list, previous inventory lists and sales lists, you will be able to identify the following:
- Determine which items you can sell quickly after repurchasing them.
- Identify which items have not sold.
- Find items that are essential to your business.
Note: Just because an item has not sold does not mean it will not. Consider which selling season the items might fall into (Christmas ornaments will sell better during the Christmas season).
Step 4: Identify Which Inventory You Can Repurchase or Sell/Retire
By this step, you should see which items in your inventory can be repurchased and which ones you can retire. If you repurchase an item, consider if you need to increase the number you order (if it sells quickly). You can also repurchase an item which sells regularly even if it’s not quickly.
Retiring an item means you sell off what is left and do not buy anymore. This helps you increase any storage space previously taken up by the particular item. You can also sell the item at a discounted rate to retire it quickly.
By following these steps, you will be able to create a robust and comprehensive asset inventory management system. This will help your business run seamlessly and will help you save money on inventory you might not need.
If you find yourself in a position where you need inventory, but cannot afford it right now, you can apply for an inventory loan.
