Fixed Asset Mgt.

Fixed Assets or Capital Assets (which include all types of machines & other fixed assets and intangible assets) play a very important role in value creation process of any organisation as discussed under Machine” in “Basic Elements” section. These are next important element besides manpower of an organisation. Efficiency (in terms of time, quality, less wastage) in converting raw material into finished goods are dependent on quality of fixed assets.

Time is money and less time means more money. Therefore, more and more organisations are exploring the technologies for automation and integrated solutions to maximise the return on investment (ROI). These developments have been included in different articles and also Computerisation.

Considering their importance, all desirable practices expected from various departments vis-à-vis fixed assets management have been put together in this article:

Acquisition of New Capital Asset

    • Production department and other user departments (identifying the need)
        • Identify the assets which would increase productivity and efficiency of manpower OR make value creation activity more efficient by reducing time and cost of production alongwith producing more defect-free and quality goods.
    • Purchase Department (entrusted with purchasing of assets)
        • Identify the sources for procuring the assets from anywhere in the world;
        • Bargaining the best purchase option either cash-down or instalments (leasing / hire-purchase);
        • Negotiating pricing of ‘after sales services’, installation and AMC.
    • Investment Department (evaluation of investment decisions)
        • Evaluating all available options for
            • Cost-benefit analysis of cost of investment in fixed assets vis-à-vis expected resulting benefits after investment over the years;
            • Income-tax relief on depreciation (normal + extra), interest, instalments;
            • Opportunity cost of investing the money on cash-down vis-à-vis leasing / hire-purchase / instalments.
        • Finalising purchase of capital assets.
    • Logistics Department (ensuring safe movement of assets)
        • Ensuring early receipt of assets from vendors’ locations;
        • Follow-up with vendors for booking of vehicles and organising documents for safe movements of assets;
        • If the assets are heavy and bulky → conducting route feasibility, i.e. whether roads can carry loads of capital assets, etc.
    • Production and Administration Departments
        • Ensuring construction of platforms, etc. for installation of assets before these assets reach the organisation;
        • Installation of assets and early commercial operation of assets;
        • Putting asset identification number;
        • Taking the insurance cover, if required.
    • Accounts Department
        • Updating Fixed Asset Register with asset identification number, location, cost, date of put to use, etc.

Practices vis-à-vis Existing Capital Assets

    • Production and Administration Departments
        • Ensuring regular maintenance including annual maintenance (AMC) of assets by production department OR administration department OR maintenance team (in-house or third party);
        • Physical verification of assets covering all assets over a defined period → identifying and analysing the differences → updation of records;
        • Review of existing processes after analysis of differences in physical verification of assets.
    • Administration Department
        • Securing insurance of assets adequately with comprehensive risks;
        • Updation of asset list for the purpose of taking insurance;
        • Ensuring receipt of assets sent outside for repair;
        • Renewal of AMCs (annual maintenance contracts) regularly;
        • Ensuring timely repair of non-working assets (whether covered under AMC or not);
        • Disposal of junk assets and cleaning the space;
        • Insurance claim management (i.e. filing insurance claim, follow-up of claims, etc. for loss of assets);
        • Entry / exit gates of the organisation
            • Keeping a check on assets moving in and out;
            • Ensuring movements are supported by documents + appropriate authorisation (i.e. authorisation from higher authority for high value assets).
    • Logistics Department (ensuring safe movement of assets)
        • Movement of assets from one location another within organisation; and
        • Informing accounts department for updation in fixed assets register;
    • Accounts department
        • Updating fixed assets register for
            • Movement of assets from one location to another (updating location, etc.);
            • Disposal of assets (striking off the assets from asset register)
        • Full & final settlement of employees
            • Ensuring receipt of clearance from all concerned departments (Computer, Administration, etc.) for recovering all assets (Laptop, mobile, vehicle, etc.) before full & final settlement of employees’ dues.

Whether assets maintenance by its operators desirable?

    • Lean principles advocate maintenance of assets by its operators;
    • 5S practices include ‘Shine’ of assets;
    • Benefits
        • Operators start knowing their assets well (i.e. how they function?, what works and what not vis-à-vis an asset?) while they undertake maintenance of assets → creates harmony of man vis-à-vis machine;
        • Assets start shining when dust, oil, grease, etc. are removed → the defects are detected early rather than when asset stops functioning → small defects are corrected in the regular course of operations → allows preventive maintenance and builds congenial atmosphere of working;
        • Outside expert or maintenance team take less time for correction of faults when the assets are regularly maintained.

Some of the Process Implementation for better Fixed Asset Management

    • Report (Monthly)
        • New Assets purchase during the month
            • PO date; Vendor’s name; Asset name; Date of receipt of asset; Cost of asset; Other cost incurred; Date of updation in Fixed Asset (FA) register; Date of insurance cover taken;
            • Assets yet to be received from vendors; reasons for unreasonable delays;
        • Inter-location movement of assets but assets reached late; reasons for delays;
        • Confirmation for whether the Fixed Asset register is updated for addition / disposal / movement of assets;
        • Assets under insurance and insurance due for renewal;
        • Asset maintenance
            • Assets under AMC and due for free maintenance (i.e. ensuring free services of assets during initial warranty period);
            • AMCs due for renewal;
            • Assets under repair but not repaired (either in-house or by outside job-worker);
            • Asset maintenance schedule of assets (due date; maintenance date; whether further maintenance required?; observations about the condition of asset);
        • Non-working / junk assets
            • List of Non-working and junk assets awaiting repair or disposal.
    • Report (Half-yearly)
        • Asset verification schedule and results of verification (Shortage / Excess, if any)


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