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What Are the Different Methods of Total Asset Management?

By Osmand Vitez
Updated May 16, 2024
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Total asset management is a business activity that includes both accounting and physical activities. Companies often have different — though sometimes similar — methods for managing the assets necessary to run the company. These methods often include either facility or foundation asset management. The former is common in profit companies, while the latter is more so in nonprofit companies. Businesses can use either overarching method in order to complete total asset management.

Facility asset management separates items by asset class. Classes often include property, buildings, and infrastructure along with equipment, vehicles, and other items. Physical control is necessary to protect the assets a company stores or uses at its facilities. For example, a company may need to lock assets in buildings and specific rooms. Restricting access to the assets ensures employees do not abuse the items by which a company spends copious funds to place into service.

Foundation asset management is a much different method of total asset management. This process separates assets by the classes of human, intellectual, political, and financial. These assets are both physical and intangible in nature. Nonprofit companies use this total asset management process in order to maintain separation among assets for specific use in various philanthropic activities. Other asset groups may occur in nonprofits whenever they receive specific asset donations from external individuals.

Total asset management also requires proper accounting in addition to the separation of physical assets. For each asset group, organizations need to place a dollar amount and include them on financial statements. The balance sheet typically retains the dollar value for assets. Physical assets typically have their historical price included on this statement. Depending on current accounting principles, the market value of each asset may be on the statement as this presents the actual replacement cost.

A computerized asset management system may be necessary to track and maintain asset records in the total asset management process. These systems often use bar codes and scanning devices to physically trace assets in the business. For example, each computer used in an office space will have a bar code on the monitor and tower. Periodically, an employee scans each bar code to ensure the company accounts for all assets in the office. Each physical asset group typically has its own set of bar codes for tracking assets.

Large organizations often have a few employees who track assets. These individuals are responsible for tracking physical and intangible assets. At the end of the physical asset inventory, reconciliation with the accounting books is necessary to ensure accurate reporting.

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