How to Implement an Investment Recovery Plan to Maximize Asset Recovery
Professional Asset Management Increases ROI
Professional Asset Management Increases ROI
Wikipedia defines Asset recovery, also known as investment or resource recovery, as the process of maximizing the value of unused or end-of-life assets through effective reuse or divestment. While sometimes referred to in the context of a company undergoing liquidation, Asset recovery also can describe the process of liquidating excess inventory, refurbished items, and equipment returned at the end of a lease. Investment recovery professionals seek to identify, reuse redeploy, sell or otherwise dispose of surplus assets generated by a company as it pursues its core business.
Redeploying an idle asset to another part of an organization is often the most productive use for the asset. Asset redeployment also saves the organization money by eliminating the need to purchase a new asset at current market rates. For effective reuse, another part of the company needs to require an asset of that kind. It must also be practical to transfer and deploy the asset at the new location.
Disposition of surplus or idle assets is the process of either selling, scrapping, recycling, donating, or disposing an asset. The process involves removing the asset from an organization's books. When this is done effectively, the organization obtains capital that can be placed back into the business. In addition, a good asset sale produces revenue and boosts profits. Donations also build goodwill and deliver tax benefits. The type of disposition method employed will depend on the type of asset, its fair value, and market demand.
A study by The Investment Recovery Association (IRA) concluded that about 20 percent of a company's assets are surplus to its needs. This means, roughly one-fifth of every organization's equipment is left unused and take up unnecessary space in the inventory. These assets lie idle or in storage, depreciating in value and represent millions in unrealized value. There are costs involved with maintaining an idle piece of equipment, more costs associated with the purchase of functionally equivalent equipment in other areas of the firm.
A solid plan may include addressing indentifcation, appraisals, sales, transfers, closures, demolition and waste stream management.
How can you recover maximum value from those assets?
An investment recovery plan outlines how to identify, reuse, sell, or dispose of surplus and/or idle supplies. Investment recovery can generate significant revenue and create cost savings, allowing the organization to reduce waste and increase revenue.
The entire process begins with the identification of surplus assets. You will need to conduct a full-scale asset audit within your organization. This includes formalizing a process of locating, identifying and properly describing your surplus. It is imperative that has much descriptive data and photographic materials be gathered as possible. Incomplete data will reduce the potential for redeployment within your organization and will likely decrease the market value to prospective buyers of equipment.
Factors to consider when taking inventory of assets include:
To maintain an accurate real-time status of the asset inventory and their condition, consider investing in a cloud-based asset management software. Investment recovery asset management software allows employees across your organization to update, track, inquire, redeploy, sell, and request assets. Using this type of software makes asset management much quicker and more convenient than manual processes.
You should then decide what you want to do with the assets. Some might be better off redeployed elsewhere within the organization depending on their value and reusability. Needless purchases are avoided because procurement personnel have real-time visibility to corporate-wide surplus equipment. This cost avoidance measure directly impacts the bottom line in a very meaningful way. In order for an asset to be reused internally, another part of the organization needs to have a need for an asset of that type.
To effectively manage a redeployment program, employees of the organization need to know that these assets are available. One of an investment recovery professional's most important jobs is to promote the available surplus to the users within the organization. A good cloud-based asset management software can help with this process by providing tools for intra-company promotion such as broadcast email notifications and organic availability notifications. It is a good idea to host a dedicated portal for exclusive use by company employees to ensure easy accessibility to assets through good classifications, descriptions, geo location identification and search facilities.
If the assets do not meet a "Redeploy First" policy or are determined not to be redeployable, then you should determine the appropriate channel through which to sell them. The method depends on a few criteria such as the fair market value and the buying market. Selling company assets to a third-party vendor or dealer outright or on consignment is one option. You get immediate cash and avoid risks associated with selling in the secondary market, but you also risk losing out on additional capital if the item sells for more than expected. With a good cloud-based software solution, an alternative is to use online negoatiated deal-making/auction tools which can be targeted by industry and asset category to maximize marketing interest across varied geographies.... cutting out the "middle-man" can help maximize ROI on your surplus.
Other advantages of using a proven investment recovery software is the automation of equipment tracking ordering, invoicing, and sales contracts. It, however, need not be a mutually exclusive decision process. With The right investment recovery software, company IR professionals should be able to interface with 3rd party dealers, buyers, facility managers and employees to manage the best sales channels for the transaction.
It may determined that the equipment can not be reused or resold. In these cases, the asset will need to be disposed. A Successful divestment provides a benefit to the organization's bottom line. Scrapped equipment is usually booked as revenue to the organization while donations can also provide goodwill and a tax benefit.
To learn about how Dynprice's cloud-based Investment Recovery Software can help