Running a small business is notoriously challenging, from managing day-to-day operations and compliance to ensuring long-term growth and sustainability.

One critical aspect that often goes overlooked is asset management. Proper asset management is essential for maintaining the efficient operationally sound and profitable businesses. But what exactly is asset management, and why is it so crucial?

The fundamentals of asset management

Let’s say you run a small accounting firm, and you’ve just purchased a new computer (an asset).

If you were to manage this asset effectively, you would start by adding it to your inventory, noting its specifications, purchase date, and location.

You would conduct regular audits to check its performance and condition, and establish a maintenance schedule for software updates and hardware servicing to prevent breakdowns.

When the computer is no longer needed, you would consider redeployment for another use within the business. If there’s no need for it – or if the asset is at the end of its lifecycle – you would wipe data and recycle the hardware.

All of the above is an example of effective asset management: ensuring the computer’s value is maximised, compliance is maintained, and operational efficiency is enhanced.

In sum, here are the key stages in an asset’s lifecycle:

1. Use: Deploy and utilise assets effectively to support business operations.
2. Retrieval: The collection and recovery of assets when no longer needed in their current deployment.
3. Maintenance: Regular servicing and asset updates to ensure they remain functional and efficient.
4. Redeployment: Reassignment or repurposing assets for new uses within the organisation.
5. End-of-Life: Safely and responsibly dispose of assets that are no longer useful, ensuring data is removed securely and physical items recycled where possible.

What effective asset management means for small businesses

Proper asset management helps small businesses avoid unnecessary expenses by tracking and maintaining assets, ensuring these investments are utilised efficiently and securely, ensuring compliance with regulations like the Privacy Act and the Notifiable Data Breaches (NDB) scheme, and protecting against legal penalties and data breaches.

Strong asset management practices streamline operations, keeping assets in good working condition, reducing downtime, and enhancing productivity to meet customer demands. Additionally, it provides valuable insights into asset performance and condition, helping with strategic planning and informed decision-making for future investments and upgrades.

Say you were considering new company-wide software. A narrow approach may see you focussing solely on purchasing and installing the software. However, a holistic asset management approach would consider user training, integration with existing systems, ongoing support and future scalability in the total cost of ownership and operations. Taking this broader view, you can sidestep compatibility issues and avoid costly errors from an overly narrow focus on initial expenses and features.

Best practices for asset management

1. Inventory management: Maintain a detailed inventory of all assets, including their location, condition, and maintenance history. This helps you keep track of your assets and identify any issues promptly.
2. Regular audits: Conduct regular audits to assess asset condition and performance. This proactive approach allows you to address potential problems before they escalate.
3. Maintenance schedule: Establish an asset maintenance schedule, ensuring they receive timely servicing and updates to prevent unexpected breakdowns and extend the lifespan of your equipment.
4. Disposal protocols: Develop protocols for the safe and responsible disposal of assets by securely wiping data from IT equipment and recycling physical items in compliance with environmental regulations.
5. Consider outsourcing: Outsourcing can help avoid costs associated with hiring and training IT staff, purchasing and maintaining equipment, and managing other overhead expenses. Most importantly, outsourcing helps you focus on growing your business while an experienced partner manages a consistent approach for your office equipment.

Asset management strategy is crucial element of modern business success, where even the smallest first steps will positively impact your company’s bottom line and serve your business for years to come, providing a competitive edge.

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In particular, demand for equipment financing was highest amongst small and medium businesses in South Australia, with lending up 198 per cent in the state. This was followed by small business owners in Victoria (181 per cent), West Australia (84 per cent) and New South Wales (53 per cent).

“The operating environment has been very challenging for businesses who have navigated protracted lockdowns, the Omicron wave and major weather events,” CBA’s Executive General Manager Business Lending, Grant Cairns, said.

“While many have been cautious, we have seen strong demand for asset financing, largely driven by government incentives and businesses trying to manage supply chain disruptions,” Cairns added. “Businesses – both small and large – are now buying equipment and machinery months in advance in response to supply constraints.”

Cairns added that government incentives like the instant asset write off scheme, available until mid-2023, had provided a boost for Australian businesses.

“After the government extended the instant asset write off scheme last year, we saw a big uplift in financing for vehicles and equipment and expect this to continue into 2023,” Cairns said. “The government-backed SME Recovery Loan Scheme is also available until 30 June 2022 and is an excellent initiative to ensure more businesses can access low lending rates on flexible terms.”

The CBA has also noted that the Australian economy is looking strong in 2022. And as expectations that demand will increase, continued investment in capital goods is being seen to further fuel future growth.

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