Manage Physical Assets - Blue Billy Hospitality - Case Study Example

Managing physical assets Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name Insert Date Here (Day, Month, Year) Introduction In commercial terminology, the physical assets of any company are its both the capital and credit. For the proper and well managed work flow, it is imperative on the part of the company to look after its stock and assets, and maintain it and keep a proper record of it with the main purpose to help company in the preparation of the balance sheet for its annual reports enabling the company to put a record of its growth and maintain its profit and loss ratio. Therefore looking at the necessity of asset management, it has become all the more important on the part of the company to make the physical asset management compulsory if it really would like to make a positive growth. In our company Blue Billy Hospitality, a need is felt to create an Asset register. As we wanted to replace an old technology with a new one but the company’s CEO saw that no proper records of the assets have been kept, therefore there is a need to do something about it. There has also not been monitoring of the physical assets. In this situation, the best way is the production of the physical asset register and with the permission of the new owner we set about implementing the system for regular reporting and discussion of the performance and condition of assets. But before the asset register is prepared there is a need to know the essential tracking and inventory requirements of the organization. There is also a need to monitor machinery, computers, furniture, stock in production/after production or any other valuable equipment to ensure the business is running in the most effective manner and there is an increase in profitability and efficiency of the company. The asset management is very essential at the time when the organization is growing or expanding its activities. It is required to carefully monitor all the assets of the organization so that there is no chance of any theft and they are better maintained. Asset management is also required to better track the assets and equipments during the preparation of the audit reports and they are required and made it necessity to monitor during the process of production, manufacturing and distribution. (Glasgow Caledonian University, Online) Asset Register Structure Before the system is implemented there is a need to prepare a report to describe about the plan of action, who all will be involved to solve this task and the way we need to do it. The information is organized in the asset register on the basis of the type of structure is chosen. I have chosen the structure of a single card with three separate sections. With this structure we can easily write down asset name, purchase date and description of the asset at the top of the card and we can easily look down the card and see the maintenance and depreciation information. The biggest disadvantage of the structure is that there is a need to have enough space on each card or book to take account of the variable number of depreciation and maintenance entries that could be needed for different assets. In the asset register, the details need to be mentioned are: Asset number or code, Asset name, description and model, serial number, location and cost. There are certain depreciation details too like residue value, depreciation value, expected useful life, depreciation method either Straight line method of the depreciation or the reducing balance method, depreciation rate expressed in percentage, accumulated depreciation, book value also known as carrying account or closing written down value will be added in the register to portray appropriate details. Creating an Asset Labeling System For creating a Labeling System, there is a need to add serial numbers in the form of a Barcode to our Asset Tags. The use of barcode asset tag helps to easily locate the inventories. These Barcodes make much easier to identify and locate a very simple, accurate and cost effective approach to identify a unique number. Barcodes make the identification process of the inventories very easy. The black and white bars are that are seen at the bottom of the certain designs show unique identification number for that component. Through barcodes the chances of making errors are very less. The cost of adding a barcode to the asset tag is less and its potentialities are large. I recommend black barcodes on silver and white background. Though there is also a possibility to create a barcode on the reverse with various colors with many finding lower rates. Easily distinction is made between the small and large bars with the creating of good spacing on each side of the barcodes. (MyAssetTag.com, Online) Bar Coding is very useful as it removes the shrinkages of equipments of company through the announcements that items have been easily tracked and being accounted for. When Bar code labels are scanned with the help of a mobile device, the data entry time is reduced by 75 per cent and there are also chances for them to remove errors. Asset Bar Codes also provides a consistency with the central method used for identifying an asset enterprise wide. (WiseTrack, Online) Asset Register Headings There is also a need to set a heading for the Asset register and these headings are Asset number, Asset name, Description & Model, Serial number, location and cost. ‘Asset number’ is a number assigned to the asset making it convenient to locate, ‘Asset name’ means we should add name to the asset. ‘Description and Model’ means describing about the asset and the model to be used, then adding a ‘serial number’ again helps in easily coordinating assets, and locating them. If we add location of the asset, again it helps in better monitoring and if added cost then it would help in better finance management. The headings for depreciation details (such as residue value, depreciation value, expected useful life, depreciation method, depreciation rate, accumulated depreciation, book value) will also be added, as the fundamental purpose of depreciation is the measurement of profit along with the need to measure the decline in asset’s usefulness. (Stamford Online) The Method of Depreciation The depreciation could be worked out by following various methods like the Straight Line Depreciation Method. This is the most popularly used method for depreciation and is very easy to understand. It is based on the concept that depreciation of the assets should be taken place in equal amounts every year until it reaches its residual value. It is also essential to make prediction of the expected life of the asset i.e. number of years that you feel the asset will be useful for the business purpose. It is calculated as Purchase price of asset – approximate residual value = ---------------------------------------------------- estimated useful life of asset (BizHelp24, Online) The second method could be used is Reducing Balance Method which is basically used for tax purposes, but quite often for published accounts. Instead of charging fixed amount each year, a fixed percentage of the remaining value of the asset is charged each year. A £10,000 asset depreciated at 25% a year will be depreciated by £2,500 in the first year, but by 25% × (£10,000 - £2,500) in the second year. In contrast to the straight-line method, depreciation is more heavily weighted in the early years. (Pietersz, Online) Reconciling the disposal of assets There should be separate column under the heading “disposed assets”- and every month it should be checked which asset has been disposed and it should be marked with its disposal value accordingly. Supporting Documents Supporting Documents that required for the assets are mortgages for lands or building; loan agreements; invoices; leases for cars and computer, other equipments; Valuation notices and Advices. PART 2 In the asset register, I recommend to add a maintenance schedule in order for the management team to analyze the requisite course of action needed for the maintenance of any part or equipment. In this company, while studying the previous record I found that service of computer was done last year. I recommend adding this in the register but I found that still computer hard ware is causing a problem and there is a necessity to get the problem rectified by the hard ware expert. During the initial inspection of the physical assets, there is a need to create a pro-forma. I will form five columns for the assets, one column for each asset and five rows where against each asset problem or if no problem of each asset will be described and one row will be of recommended action of the problem and one will the approximate cost involved. Hereby I am conducting inspection of the computers and cars because during my very first inspection I found problem in these two. In computer, I found there is a problem with the hardware, which should be rectified on priority basis. The computer is placed in the front office where all the records of the company’s, and the data of the various financial records are maintained. Second physical asset is car of the CEO of company. It is always placed at the close proximate of the office of the company’s CEO. The motor of the car is not working and need urgent repair as it could upset the functioning of or CEO. Such items like computers service and maintenance, furniture, and electrical equipments – AC’s, generators, fax machines, Photostat machines, should be maintained from outsourced sources because these are the items that are repaired and maintained by expert providers from the companies these assets are bought. From hereby I will write a memo. In the memo I have written I have maintained register and did the barcoding of each asset mentioning about each and every record about the assets and the recommended action required. For maintenance of the asset, I have given responsibility to the maintenance manager keep on updating me on timely basis on the condition of assets being used by them. The agenda items will be last service, next service, incident report, date of incident, suppliers date, and contact details for maintenance and repair. PART 3 There is a need to submit a budget proposal for replacement of vehicle, computer with new software for business purpose and maintaining toilets and staff room facilities and sources of funds can be organizations funds for maintaining toilets and staff room facilities and loans for vehicles and computers. There are companies offering loans at very competitive interest rates for new vehicles whereby rate of interest is as low as 5.88%, which can be spread over to 60 months i.e. repayment in 5 years. Even loans for computers can also be availed in which 90% of the cost will be financed and 10 % of the cost has to be paid and rest to be paid to the agency in 48 months. The type of insurance I recommend is comprehensive insurance for vehicle and for computers, there are various companies like SAFEWARE Computerpwners, which provides coverage for the replacement of purchased software, hardware and media and at cost of $49 per year, power surges, thefts and accidents are covered. (SAFEWARE, Online) Works Cited BizHelp24. “Depreciation - What Does it Mean.” (Internet) Available: http://www.bizhelp24.com/accounting/depreciation---what-does-it-mean-3.html, April 19, 2009. Glasgow Caledonian University. “Assets Register Guide.” (Internet) Available: http://www.gcal.ac.uk/fno/staff/finass.html, April 19, 2009. MyAssetTag.com, Online. “Add Serial Numbers in the form of a Barcode to Your Asset Tags.” (Internet) Available: http://www.myassettag.com/tip6.asp, April 19, 2009. Pietersz, Graeme. “Reducing balance.” (Internet) Available: http://moneyterms.co.uk/reducing-balance/, April 19, 2009. SAFEWARE. “INSURES YOUR COMPUTER.” (Internet) Available: http://www.sourcedata.com/500/000398.html April 19, 2009. Stamford Online. “Depreciation of fixed assets.” (Internet) Available: http://www.stamfordonline.com.my/courses/dca/dca103/DCA%20103%20Lecture%207.pdf, April 19, 2009. WiseTrack. “Professional Quality Asset Labels.” (Internet) Available: http://www.wisetrack.com/barcodes.html, April 19, 2009. Read More