What Is Asset Management?

The first question might well be: What is considered an asset, for the purposes of determining how to manage that asset?

Essentially, asset management is a strictly defined process that deals with hard goods, inventory, personnel systems paper value and projects, all of which help make up the total assets of a business. The key, for most asset management professionals, is making sure that the company’s assets are moved and controlled in a cost-effective manner.

Systems of asset management have been made much more efficient and accurate with the introduction of computer programs. For example, computer software designed specifically for an industry such as transportation makes it much easier to keep track of moving assets like trucks and trains.

From another point of view, individuals and businesses may also manage paper assets and personal wealth with a solid asset management plan. A huge portfolio of certificates, stocks, bonds and other commercial paper can more easily be managed with the proper computer program. Of course, individuals with a keen sense of organization must also contribute to efficient management of assets.

In the case of transportation or paper assets, the management process must have clearly defined objectives. It may not be enough, for example, for a transportation business to state that, at day’s end, the owner knows where his trucks are. While this may be a giant step forward for some companies, other businesses might wish to have much more information about each asset.

In the case of managing stocks, bonds and commercial paper, the assets cannot be moved without a plan and some well-defined objectives. The person who handles assets for an investor must know where each item is and where it may need to go to produce the best return. In this sense, the paper asset is not much different from an asset with 18 wheels.

Continuing to picture paper and physical assets as very similar, the managers of assets must consider diversification. Stock-and-bond managers are known to put great emphasis on spreading the funds among several reliable locations. A trucking company manager must also be sure that his rolling assets are in various locations, where they are most likely to do the most good for the company. In both cases, if all assets are in one location, they usually don’t remain there for an extended period.

By another definition, asset management involves a very structured plan for using assets as tools to produce a benefit. In some educational seminars and business-training material, an asset is consistently referred to as the means, not an end in and of itself.

Asset management techniques have been applied to dozens of business types, including such seemingly mundane services as highways and other traffic infrastructure. While these assets are primarily viewed as public property, the engineers and administrators must have a defined plan for keeping track of each item, so that new construction and maintenance may be planned for.

At its most basic level, an asset management plan should provide for identifying each asset, efficient use of each asset, and removal of the asset from the company books at the proper time. Only then can a business entity feel it has assets under control.

Written by Lucas Beaumont

Generalist. Wikipedia contributor. Elementary school teacher from Saskatchewan, Canada.

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