Are you doing enough capital asset management planning?
As an organization, you already understand how important it is to know where your tax dollars are being spent. You have budgets and projections and a clear sense of what your company needs day to day and year over year. But are you prepared for the future?
What if there was a way to plan your capital investments that could utilize asset management data to drive your long-term maintenance strategy? Meet asset capital planning.
What is Capital Asset Management Planning?
Asset capital planning centres on a capital improvement plan (CIP). OpenGov calls a CIP “a working blueprint for sustaining and improving the community’s infrastructures. It coordinates strategic planning, financial capacity, and physical development. A CIP stands at the epicentre of a government’s Planning, Public Works, and Finance departments.”
This blueprint will generally include the following elements, as OpenGov explains them:
- Estimated Overall Cost Of Each Project
- Estimated Operational & Maintenance Cost For Each Project
- Estimated Project Timelines
- Total Revenues From Each Project
- Funding Sources
- Project Prioritization
This means that a CIP can help you determine if investing in a new building or piece of construction equipment is a good choice based on the likelihood that the risk is less than not making the investment at all.
By way of an example, asset capital planning for a utility company requires assessing the costs and risks of investing in new sewage treatment equipment based on the projected risks of the failure of the current system.
How to do asset capital planning
The key to quality asset capital planning and management is data. You need to understand the assets you have and have reliable information on which to base your investment decisions for the future. Your organization may own 100 delivery trucks, but unless you know when they were purchased, what the expected life cycle is, and when they are likely to need replacement, then accurate investment planning is impossible.
Fortunately, asset capital planning software is able to help you solve this problem.
Your first step in the planning process is to create a detailed inventory of all of your assets. Keep (or make) a record of everything your organization owns.
Track where the asset is. Make certain that you understand when it was purchased and at what cost. And employ a tool, like enterprise asset management software, to help you to predict its lifecycle.
The next phase of asset capital planning is to develop an accurate life-cycle cost for each asset in your inventory. Science Direct explains that “Life cycle cost (LCC) is an approach that assesses the total cost of an asset over its life cycle including initial capital costs, maintenance costs, operating costs and the asset’s residual value at the end of its life.”
This data will help you to understand the cost of alternatives to a particular asset–replacement, repair, or another asset altogether.
Next is building an understanding of what your assets allow you to do, or the services they enable you to provide. If your cherry picker is the only way your tree service can function effectively, then the risk of being without it may be unbearable. As a result, you will need to ensure that you either have a plan in place to repair or replace the machine, or to mitigate the reduction in the service you can provide if it fails.
Finally, you will collate all of this data, and use it to execute a data-driven strategy. capital asset management and planning software, like NEXGEN’s powerful solutions, provide tools for:
- risk-based capital improvement prioritization
- predictive maintenance
- asset lifecycle planning
- condition assessments that automatically update asset useful life
What this means is that you will have all of the data you need to make your capital decisions in the same software that you are using to manage your assets.
To learn more about our asset capital planning and management solutions, partner with NEXGEN today!