We all know that all organizations have assets that they hold dear. These are needed for the continuous production and profitability of the business. However, have you ever asked yourself what happens to these assets once they prove to be non-productive?
Assets are disposed of when they can no longer fulfill their primary objectives. To help you understand how this works, this article will focus on asset disposal. We will give you an overview of the asset disposal process, look into the process flow, process improvement ideas and finally, some of the best practices.
We hope that by the end of this article you will be well-equipped on the subject.
Asset Disposal Process Overview
Before looking into the asset disposal process, we need first to define what an asset is. An asset is any valuable item owned by a company to fulfill a certain objective. These can therefore be physical items such as vehicles and computers or intangible items such as intellectual property.
Asset disposal is how these long-term assets are taken off from the account records and sold at a given value, usually known as the disposal value. Therefore, the asset disposal process or procedure refers to the steps taken to eliminate the asset from the account records of the organization.
We also need to define disposal value now that we have mentioned it. It is the price tag of the asset once it has ceased to be useful. The minimum value at which an asset is sold after it has been replaced is its disposal value.
Many reasons necessitate asset disposal. However, before disposing of an asset, one should look at the asset’s working condition. It becomes necessary to eliminate an asset if it requires more maintenance than it should. It would be better to replace the asset in such an instance.
Asset disposal is also necessary if the asset has no place in your current requirements. Therefore, check if the asset meets the standard of the company. If it does not, then it’s worth letting it go. Assets also have their life cycles. You can expect their productivity to decrease once the asset life is over. Such need to be done away with since they cannot produce the input one would expect.
Lastly, asset disposal becomes necessary if there is a new updated version. It is common thing for companies to sell their assets when updated versions get into the market. This helps them compete with rival businesses.
Asset Disposal Process Improvement Ideas
1. Collect As Much Information as Possible About the Asset
You need to gather as much information as possible if you want to improve the disposal process for your assets. Start gathering information from the moment the asset lands in your organization. Therefore, check your fixed assets audits, either on a physical file, spreadsheet, or software.
Collecting information will help you determine if all the assets serve their purpose and which one needs to be eliminated. When collecting information, ensure that you perform an asset evaluation. Ask yourself if they meet your short-term or long-term goals.
Asset evaluation based on your goals will help you decide whether you should keep, maintain, renew or upgrade an asset based on the value they bring to your company.
2. Have a Tagging System
This is important, especially if you have a large company with several assets. It can be quite difficult to manually keep track of such assets without a tagging system. This means that you may have a hard time knowing what needs to be disposed of or retained.
You do not have to invest in a new or complicated tagging system; a management software can do the magic. However, note that you will need GPS devices, barcodes and scanners. The latter will play a major role in scanning the assets and recording their locations.
With a tagging system, you will have control of all your assets, save time and keep good records. This will help you locate assets that need to be disposed of.
3. Track The Asset Life Cycles
Like we mentioned at the beginning of our article, assets must be eliminated once they have lived their usefulness. Every asset has its life cycle. Some have shorter lifecycles, while others have longer ones provided that they are regularly maintained.
You can also perform regular monitoring of the assets through a fixed asset solution to help you determine their lifespan and how much it needs to be obtained. If it requires too much maintenance that will minimize the return on investment, then it wise that you dispose it.
Remember, the main aim of asset disposal is to ensure that your business remains efficient and profitable. Any technology that has outlived its usability will present lots of problems that you are better off without. It will most probably add to your company’s expenses other than reducing costs.
Also, remember to track the performances of the assets even as you determine their life cycles. However, note that asset tracking is very different from inventory tracking and should not be confused. Asset tracking is the location of assets used for the operation of the business. On the other hand, inventory tracking is the location of goods distributed to different locations or partners, used by the employees and sold to consumers.
You should also strive to have an asset database in place and regularly update it automatically. There are several software that, when configured, will give you a prompt to upload your asset data to the dashboard. What happens if you have physical audits? You can input the data directly, even though it can be time-consuming.
However, once your information has been stored in the database, you will have an easier time tracking them later. You can further automate different aspects of the tracking workflow, which will reduce your administrative burden.
4. Understand Asset Depreciation
One of the best ways of improving your asset disposal process is to understand or know the depreciation of your organization’s assets. What assets are no longer suitable for use? Why are not they not suitable for use?
Understanding asset depreciation will help you know the outdated items that the employees are still using. They may not know the impact of these outdated items, but they surely slow down work and minimize output.
Therefore, ensure that you conduct regular depreciation tracking to identify the outdated items and should not serve the organization anymore. Regular depreciation tracking will help you know when you need to make new purchases or replace your items.
5. Automate As Many Processes As Possible
Asset management can take a huge toll on you if you prefer doing it manually. It normally takes a lot of time, effort and costs. We advise that you try to automate as many processes as possible to save you time and assure you of efficient operation.
You should consider using an automated asset management solution that will automate all your asset management processes such as asset maintenance, asset value and depreciation tracking, contract management, cost analysis and report generation. You will have an excellent asset disposal process if you automate as many processes as possible.
Asset Disposal Procedure Best Practices
Just because an asset does not fit your organizational standards does not mean that someone else will not find it useful. One of the best ways of dealing with such assets is to sell them. It is not only cost-effective but also gives you some returns, further maximizing your returns on investment.
Reselling a piece of equipment also means that you will raise some money to buy a new one or a better version. It, therefore, offsets the cost of your new equipment and at the same time help in environmental conservation.
However, before reselling, you need to determine the value of the asset and even identify some of the best markets with ready buyers to save time. If you find out that your equipment is not suitable for resale, we advise that you donate it to anyone who may find it worthy.
This is generally common for IT assets and hardware. If you ever find yourself in a situation where reusing an asset is out of the question, you can try recycling it. However, make sure that the recycler has the proper authorization and can recycle the item effectively and responsibly.
Also, make sure that you erase any data that may be in the item, if it is a computer or a data processing item. This also goes for reselling.
3. Ensure That You Do Not Pollute the Environment
It is reported that over 40 million tons of wastes are produced every year. These range from machines to computer wastes. Therefore, you should strive to look for other disposal options before considering dumping the assets.
However, if that is the only option, make sure that you take care of the environment. Do not dispose assets in a way that will increase the total amounts of wastes generated every year. If you are contracting a disposal company or partner, ensure that they show you a waste carriers license. They should also be certified and conversant with environmental regulations.
All in all, ensure that the disposed assets do not become harmful to the environment as we owe ourselves and the future generations a clean and healthy environment.
4. Offer Employee Education
You have to educate your employees if you need smooth asset disposal. It does not matter even if you have a dedicated team to deal with asset disposal; other employees need to be educated too. The wider team of employees should understand why asset disposal is important and how it can be done not to pollute the environment.
If you are an IT company, we advise that you educate the staff on the right IT Protocols for the business and what they should do once they identify that a certain product has exhausted its life cycle. For electronic equipment, they should be taught how they can protect business data in such cases and even help the company maximize its return on investment.
5. Have a Chain of Custody
Having a chain of custody is important, especially if you plan to dispose of an asset by reselling it. This is a paper trail that shows the location of the equipment and the people responsible for it in all the stages of its lifecycle.
You should know how best to record all that information and ensure that the chain of custody document is as detailed as possible. Ensure that it starts from the moment the equipment was introduced into the business to the time it got destroyed, recycled or resold.
Remember, you will not just be keeping track of the asset but also creating evidence that will help you prove your due diligence whenever necessary.
In asset tracking, remember to assign tracking numbers to assets. The most common practice is to track assets through their serial numbers, which is not as effective as one may think. It is common to find more than one item having the same serial number as the others, which may make identifying the ones that have lived their usefulness challenging.
Therefore, make sure that you assign unique tracking numbers to all the assets. You do not have to do this manually, as several free online tools can help you generate unique serial numbers.
Asset disposal plays an important role in helping the business operations remain efficient by eliminating assets that have lived their usefulness. However, it should not be done blindly but following a well-defined process.
Ensure that you also note some of the asset disposal process improvement ideas that we have talked about and heed to some of these best practices. Strive to understand asset depreciation also to know the disposal value of your product. If done right, asset disposal will help your organization tremendously.
Lastly, get acquainted with the asset disposal procedures that will help you offset all the assets that do not fit your organization.