Why small and medium size businesses should consider adopting modern asset management systems to promote growth, scalability and organisational efficiency.
Small businesses are considered the backbone of the UK economy as they play a crucial role in driving economic growth. With small and medium enterprises accounting for over 99% of all businesses in the UK and providing employment to around 60% of the UK’s private sector workforce, their importance to the UK economy cannot be overstated, and it is essential that they are supported and given the help and information required to thrive.
Small businesses are facing constantly evolving market competition with over 360,000 small businesses opening in the UK per year. Therefore, eliminating unnecessary costs and optimising organisational efficiency is key to remaining successful in their markets. While spreadsheets have traditionally been a popular tool for managing assets, as a business grows, the use of spreadsheets alone to manage assets becomes more inefficient and errors become more likely, it would be best to hire third-party accounting services for a more efficient and keen management, for example check out https://hiline.co/.
What is Effective Asset Management and Why is it Important to Small Businesses
Asset management refers to the practice of effectively managing, monitoring and tracking a company’s physical and digital assets. Physical assets refer to assets such as equipment, tools, vehicles and technology that are owned by a business. Digital assets refer to the various pieces of software that are used within a business.
Effective asset management in the context of SME’s is an area of the business that is crucial to get right. As with most businesses of this size, assets will often be limited, therefore smaller businesses have to ensure they are utilising all available assets to their maximum potential. Meaning, if an asset were to go missing or break down, the effect on the business would be much more profound than in a larger organisation. Smaller businesses also face issues such as lack of asset visibility, working to inconsistent budgets and a higher risk of incorrect data as a result of a non-comprehensive asset management system.
The implementation of a comprehensive asset management system will allow small businesses to gain a holistic view of all their assets meaning they can monitor assets efficiently, detect issues early and perform proactive maintenance. This will help businesses avoid unexpected costs, minimise downtime and extend the lifecycle of their assets. Through having a complete view of the performance of their assets, the business can also determine when the best time to invest in additional assets is as they will understand when they are using all available assets to their maximum potential and the demand for their services is outgrowing the possible output from their current assets.
Asset Management Using Spreadsheets
For businesses just starting out, utilising a spreadsheet initially is a good place to start as they are relatively inexpensive and most people understand how to use them at a basic level. The same goes for companies who will have less than 10 users or less than 100 manageable assets. However, in the case of most small businesses, growth and scalability is typically the goal and using spreadsheets alone to manage assets is likely to hinder these goals.
The Pitfalls of Only Using Spreadsheets for Asset Management
In an article featured in Forbes, spreadsheets were labelled as one of the most dangerous software for businesses. When looking at businesses seeking to grow, there are a number of issues that present themselves when spreadsheets alone are used for asset management:
Limited Scalability
As a business grows, it is likely that their inventory of assets grows in accordance with the business. The use of a spreadsheet alone to manage a growing number of assets becomes problematic as spreadsheets are not designed to handle large amounts of data that can be handled with ease. With more data being recorded, the more time consuming and complicated the spreadsheet document becomes and this gives rise to increased errors. On top of this, large spreadsheets become unwieldy making it difficult to locate information and make necessary changes to the data.
Error-Prone
It is easy to make mistakes when entering data into a spreadsheet which can result in incorrect data being recorded. This simple error can have a considerable impact on the businesses whereby incorrect asset valuations, missed maintenance schedules and wasted resources, become an issue. As small businesses already have limited resources and finances, simple human error when using a spreadsheet to manage assets could be extremely costly and inhibit the growth of the business.
Limited Functionality
While spreadsheets can be customised to some extent, they were not developed to specifically manage assets. Spreadsheets do not possess all the specific features needed to manage assets effectively. For example spreadsheets do not have the ability to track maintenance schedules or generate reports, which are critical for effective asset management. Additionally, spreadsheets lack the ability to automate data entry or capture data in real-time. This creates a lack of accuracy in asset data therefore making it a challenge to track asset performance, optimise asset utilisation or make informed business decisions based on the performance of assets.
How An Asset Management System Addresses The Pitfalls of a Spreadsheet
Whilst the list of potential pitfalls to using spreadsheets for asset management above is not exhaustive, it provides some of the most commonly experienced issues faced by businesses. Here are some of the ways asset management systems address the pitfalls of using spreadsheets alone for asset management:
Asset Management systems are optimised for scalability
Asset management systems are designed to scale with a business, meaning they are extremely valuable to a business looking to grow. Asset management systems can handle large amounts of data meaning the smaller business can continue growing without fear or outgrowing their asset management system. For example, a small business in the rental car industry could utilise an asset management system to manage their fleet. As the business grows and they acquire more vehicles to rent out, the asset management system can scale to accommodate the increasing amount of data. Furthermore, many asset management systems are cloud-based allowing businesses to store their data in a secure and easily accessible location, meaning businesses can continue assessing their assets away from the office.
Reduced human error
Asset management systems use automated processes to capture and store data, reducing the risk of human input error. Many asset management systems also have built-in validation rules that ensure that data is entered correctly. Additionally, these systems can generate alerts and notifications when maintenance is due, thus reducing the risk of missed maintenance scheduled as a result of human error. This automation results in reduced human error which allowing the business to include expenses such as maintenance in their budgets rather than it becoming an unexpected cost.
Asset management systems possess advanced functionality
Where spreadsheets lack functionality in relation to how they can be customised to effectively manage assets, asset management systems have advanced functionality whereby they can track maintenance schedules, generate reports and provide real-time asset tracking. Taking a new example of an SME in the logistics industry, an asset management system would allow the business to obtain real-time tracking of their vehicles which will include information on; the location of the vehicles, the fuel consumption and condition of vehicles and provide maintenance scheduling. This therefore allows the business to optimise their fleet and reduce costs. These systems could also be customised to track specific data, relevant to the business. For example, the logistics SME could track driver specific information such as feedback, hours driven and delivery locations.
Switching from Spreadsheets to Asset Management Systems
The process of switching from spreadsheets to a digital asset management system may appear to be a daunting and delicate process. However, the transfer of all existing data from spreadsheets to an asset management system is an easy procedure. In some cases, the process can be completed in a matter of minutes, depending on the amount of data the business has.
Once you have found an asset management software that meets the requirements of your business, you can export your spreadsheet data into the software and the vendor will make it as clear as possible how to upload this data into the new system.
While spreadsheets may be an effective solution for managing assets in the early stages of a new business, they quickly become ineffective as the business grows. Asset management systems offer better scalability, reduced human error and advanced functionality that goes beyond what is available in spreadsheets. The use of an asset management system allows smaller businesses to streamline their asset management process, reduce the risk of errors and save time and money.
This article is written and researched by Charlie Green, Senior Research Analyst at Comparesoft.