Legal Compliances of Fixed Assets Management

A fixed asset is an asset, often but not exclusively a physical asset, that is purchased for long-term use and is unlikely to be quickly converted to cash. In comparison, current assets include cash or other assets that are likely to be converted into cash within one year. In this article, let us have a look at what are the Legal compliances of Fixed Assets Management means.

What is Fixed Asset Management?

Fixed asset management is the technique to track and maintain an organization’s equipment and physical assets. It includes vehicles, computers, furniture, and machinery.
Using an asset management system, organizations can:

• Track and monitor fixed assets
• Monitor equipment and machinery in multiple locations
• Lower maintenance costs
• Improve operational efficiency
• Have records of retired, sold, or lost assets

Fixed asset management enables organizations to monitor equipment and vehicles, evaluate their condition and keep them in good working order. In this way, they minimize lost inventory, equipment breakdowns, and downtime – and increase the lifetime value of assets.

Importance of fixed asset management 

Fixed assets such as servers, delivery trucks, and elevators require large capital investments. They can make up a large portion of a company’s net worth. In some businesses, up to 40 percent of the investment goes into the purchase of equipment and vehicles.

The better and more efficiently a company manages its assets, the greater the prospect of maximizing value from these investments. An organization may experience the following things without fixed asset management:

• Unplanned downtime
• Device malfunctions
• Misplaced or lost inventory
• Safety or environmental violations
• Failure to meet required compliance or set regulatory standards

For companies with large inventories, the results can translate into millions of dollars in lost productivity, repairs, replacements, or fines. In addition to immediate costs, substandard equipment can affect the quality of an organization’s services or products—and in turn, affect customer satisfaction and business reputation.

According to the international standard ISO 55000, asset management should maximize value for money. Ideally, fixed asset management improves the quality and lifespan of equipment and ensures the best return on investment.

Asset Management Compliance Challenges

Compliance with property management is not an easy job. It needs the business to apply strict policies and regularly monitor its performance. Here are the challenges businesses face when documenting their workflows to achieve compliance:

• Stay up-to-date: One of the biggest challenges in compliance is staying up-to-date, especially as your business grows. Policies and rules are updated regularly, if you don’t keep up you will end up paying penalties.

• Standard of conformity: Evolving market trends require the organization to constantly reassess its quality standard. It means coping with necessity! No one wants their organization to be penalized for not meeting quality standards.

• Data security: Data security is a very sensitive matter because the organization has a lot of data including the organization with the customer name and so on. As we know today, cyber-attacks are on the rise. The company is responsible for keeping data safe not only for regulatory compliance but also for its customers.

• Inconsistent core processes: Without a consistent baseline, it won’t be easy to track how much improvement has been made so far! So all companies must have consistent core protocols and compliance documentation standards. This becomes hectic, financially, and time-consuming, especially as your organization grows and expands.

Different types of compliances

Compliance can be divided into two categories.

• Internal Compliance: Internal compliance is a designed set of rules and regulations set by company management.
  It must be followed by every employee, customer, etc. It is done so that the quality of the product or service is not compromised.
  For example, all departments must ensure that all documents and papers are well maintained so that no problem occurs during the audit.
• External Compliance: Also known as regulatory compliance, Government bodies and organizations set rules and policies not just for organizations but for all organizations. Compliance is done for a variety of reasons, such as:
  • • Check safety parameters for employees.
    • Quantity and quality check of the products.
    • To check that the organization is using valid software.
    • To check that everything is formalized and documented.
    • External compliance also reviews financial records as required by law and ensures that records are clean and investors feel free to invest in the business.

Overall, external compliance ensures that your organization adheres to the industry’s set of rules and protocols. 

How can companies manage fixed assets?

Fixed asset management helps companies track, and appropriately calculate the value of their fixed assets and thus protect it. This is usually required by the software.
Fixed asset management software can perform a variety of tasks, including tracking the location of physical assets, automatically calculating depreciation, and tracking repair and maintenance requirements. Good fixed asset management software will benefit your business by making it easier for both management and staff to deal with issues such as equipment damage.

Final words

Compliance with asset management is very important for business. It keeps your brand image clean and allows investors to invest without any doubts.
However, when an organization does not follow the rules, it faces problems. You can easily avoid all these problems and challenges with asset management software. As this software is cloud-based, it provides data security so there is no chance of data breach and it maintains multi-layered data security and encrypted form.