New isn't always necessary: Why asset management makes good business sense
We hear it time and time again in business: "You have to spend money to make money." The statement is more than a cliché, it may be bad business.
Of course, investing in a business is crucial, but making money is not about acquiring assets. It's about managing them.
When we make a major personal purchase, we take care of the item. We paint our houses, and change the oil in our cars in order to prolong the investment's life. The same should be true for business purchases, but many organizations do not practice good asset management.
The federal government gives industry a seven-year write-off for new equipment. As a result, many business owners believe that they are 'supposed' to throw away a purchase after that period of time, no matter how well-thought it was, and replace it with something new. Habits influence business decisions and this is a habit that businesses need to stop as it's often the source of completely unnecessary expense.
We need to address this 'rip and replace' mentality and encourage businesses to review the assets on their balance sheet, and how they can recondition these and extend their value. This practice can contribute directly to any organization's bottom line.
Meanwhile there is the pressure on organizations to 'go green' and reduce their impact on the environment, and to consider alternatives to the wasteful and damaging strategy of unnecessarily replacing equipment. Managing our resources, as business owners and responsible human beings, is more important that it has ever been.
So, take my advice - don't always spend money to make money. Take care of what you already have. If you are buying new equipment, furniture or fixtures for your business, make sure they are good quality, long-term assets. Then manage these assets: keep them in good condition, invest in their maintenance and watch your wealth grow.
My Best,
RMI
Of course, investing in a business is crucial, but making money is not about acquiring assets. It's about managing them.
When we make a major personal purchase, we take care of the item. We paint our houses, and change the oil in our cars in order to prolong the investment's life. The same should be true for business purchases, but many organizations do not practice good asset management.
The federal government gives industry a seven-year write-off for new equipment. As a result, many business owners believe that they are 'supposed' to throw away a purchase after that period of time, no matter how well-thought it was, and replace it with something new. Habits influence business decisions and this is a habit that businesses need to stop as it's often the source of completely unnecessary expense.
We need to address this 'rip and replace' mentality and encourage businesses to review the assets on their balance sheet, and how they can recondition these and extend their value. This practice can contribute directly to any organization's bottom line.
Meanwhile there is the pressure on organizations to 'go green' and reduce their impact on the environment, and to consider alternatives to the wasteful and damaging strategy of unnecessarily replacing equipment. Managing our resources, as business owners and responsible human beings, is more important that it has ever been.
So, take my advice - don't always spend money to make money. Take care of what you already have. If you are buying new equipment, furniture or fixtures for your business, make sure they are good quality, long-term assets. Then manage these assets: keep them in good condition, invest in their maintenance and watch your wealth grow.
My Best,
RMI
Labels: saving money
posted by TRT Blog on
Friday, June 20, 2008
at
9:25 AM
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