What Is Asset Inventory Management? Small Business Guide

Whether you’ve acquired physical assets like machinery and tools, real estate, or vehicles, or digital assets like product photos and consumer behavior data, ownership can increase the value of your company. But with more assets comes greater administrative costs. Someone has to keep track of everything your business owns, figure out where it’s all located, how much it’s worth, and how much it costs to store. Acquiring assets will also increase storage costs. Handling all of these considerations requires extensive record-keeping.

In the old days, this was a tedious manual task, handled in written ledgers that were hard to keep up to date. Today, much of this work is done with software you can access from personal computers and mobile devices. In fact, there’s an entire industry devoted to this work called asset inventory management, and it’s transformed the business operations of countless companies. Here’s how it works.

What is asset inventory management?

Asset inventory management (AIM) is the process of tracking, organizing, and monitoring an organization’s physical and digital assets throughout their life cycle. The typical asset inventory management system combines asset tracking—keeping track of where your company assets are located—and strategic management to determine the best way to replenish and distribute critical assets.

In most cases, businesses conduct asset inventory tracking using asset management software. It helps locate physical assets through barcode scans, geolocation tags, and comprehensive inventory databases. Workers oversee these asset management systems, using them to track inventory and generate detailed reports designed to be shared with purchasing, sales, and logistics teams.

What types of items can you track with asset inventory management?

An asset inventory management system can track nearly all of your company’s property, from tangible assets like office equipment and merchandise to digital assets and intellectual property. Here are some specific categories you might find in an asset tracking system:

• Equipment. Machinery, office furniture, computer equipment, tools.

• Digital assets. Saved files, software licenses, virtual servers, customer data, domain names, social media handles.

• Intellectual property. Patents, copyrights, plans, proprietary methodologies.

• Vehicles and fleet assets. Cars, trucks, construction equipment, warehouse vehicles.

• Real estate and infrastructure. Buildings, parking lots, land assets, HVAC systems, landscaping.

Asset inventory management vs. inventory management

Inventory management and asset inventory management both involve tracking and managing your organization’s property; however, the two terms are not synonymous.

Here’s how they differ:

Inventory management

Inventory refers to products your business has on hand for eventual sale. These products are often referred to as current assets—ones that will not remain with your business because you intend to either sell them or use them to make new products.

Inventory management systems focus on managing stock, ensuring optimal inventory levels to meet customer demand, and minimizing costs associated with holding inventory. Too much inventory can financially burden your business. The storage costs can be significant, and you risk depreciation and product expiration before the products can be sold. On the other end of the spectrum, keeping too little inventory can lead to stockouts when inventory levels cannot meet customer demand.

You can leverage inventory management software to track inventory levels, manage stock movements, and optimize supply chains to meet future demand. This involves monitoring raw materials, work-in-progress items, and finished goods—all of which count as current assets. Efficient inventory control can help you keep products moving and costs down.

Asset inventory management

When business professionals talk about asset inventory management, they’re talking about fixed assets—items a business owns and uses for its operations, not for sale. This includes equipment, machinery, and technology. Managing asset inventory involves tracking assets throughout their life cycle, from acquisition to disposal. This is somewhat different from inventory tracking because inventory describes products a business intentionally owns for a short period of time.

You can use asset inventory management software to catalogue most of your company’s asset data. For instance, you can leverage an asset management solution to conduct periodic audits of your company’s property, from vehicles and equipment to software and IP. You can then calculate asset depreciation, track asset movements (e.g., moving machinery from one factory to another), and track maintenance history of specific equipment, among other things.

Note that while, in the broadest terms, asset inventory refers to fixed assets, some businesses consider stock and raw materials to be inventory assets. These businesses might use the same asset tracking software to manage inventory flow and to manage assets as long as they remain with the company.

How does asset inventory management work?

• Centralized databases
• Asset location tracking
• Asset condition monitoring
• Periodic audits and inventory control
• Asset depreciation calculations
• Integrations

Asset inventory management involves systematically tracking, organizing, and maintaining your organization’s fixed assets to ensure efficiency, security, and longevity. These assets include physical equipment, digital property, and sometimes inventory itself.

Here are the components and functions of an asset management system:

Centralized databases

Asset inventory management starts with creating a centralized asset database, allowing you track assets and manage inventory throughout your organization. Such a database should include details such as an asset name, unique asset ID, serial number, acquisition date, current asset location, condition, maintenance history, warranty details, and the estimated asset value.

A well-organized database will classify assets based on type. This means that IT equipment, vehicles, office furniture, manufacturing tools, and digital assets will each have their own category within the database.

Asset location tracking

Once you know how many assets you possess, you must ascertain each asset’s current location. Asset inventory management systems can use barcodes, GPS tracking, or asset tagging (typically with RFID tags) to automatically update an asset’s current location.

Digital assets (e.g., software licenses and files stored in cloud servers) do not require physical tracking, but they do need proper asset information management. All relevant stakeholders should be able to locate and access these files, and your asset database can help them do that so long as stakeholders use the right tags and label assets clearly.

Asset condition monitoring

Physical assets such as machinery, vehicles, and IT equipment need regular maintenance to prevent breakdowns. Your asset maintenance reports should include maintenance history, condition assessments, and alerts for when replacement assets are needed. Digital assets do not require physical maintenance, but your asset inventory management system may help you keep track of software updates and license renewals.

Periodic audits and inventory control

Asset managers conduct periodic audits (e.g., once per quarter, once per year) to ensure asset data accuracy, detect theft or loss, and help with risk management. A physical asset audit will confirm the existence and condition of each unique asset. A digital asset audit will confirm if software licenses are current and hosted files are in their expected location.

Asset depreciation calculations

Your business must calculate asset depreciation to determine an asset’s value over time. This serves both accounting and tax purposes. Asset inventory management software can automate many calculations for asset depreciation, especially for commonly held assets like vehicles. This software assistance makes financial reporting more efficient. Rather than manually calculating asset depreciation, your team can focus on more strategic endeavors.

Integrations

When shopping for an asset inventory management solution, prioritize one with robust integration capabilities.

Asset inventory management should integrate with existing systems and processes, such as:

Inventory management

Inventory management systems help you optimize stock levels so you’re not at risk of carrying too much inventory or running out. Shopify offers some inventory management tools right out of the box. You can also use inventory management apps such as Stocky, to handle more complex inventory needs. You can often conduct inventory management and asset inventory management from the same platforms.

Enterprise resource planning (ERP)

ERP solutions help you manage business operations across departments. Knowing the status of assets can simplify upkeep tasks for project management teams and operations teams responsible for those assets. Popular software solutions include Shopify’s Global ERP Program and NetSuite.

Accounting

The right accounting software goes beyond helping you with expense tracking, payroll, and tax prep to monitor the overall financial health of your business, which includes knowing and planning for the status of your assets. Popular options include QuickBooks and Wave, which has a free account option.