Every business has assets. And asset tracking is critical for small businesses due to the higher value those assets have. Yet, few small businesses do it.
Small businesses have a unique challenge to asset tracking.
When you are a small company, you have more to lose if you don’t get asset tracking right, and not in terms of quantity, but in terms of value.
For example, if your business has 15 excavation machines, and loses one, it is not a big problem as when you have only two and lose one. The business remaining with 14 machines will lose just about 7% of its excavation capacity, while the one remaining with one will have lost 50% of its excavation capacity.
The less equipment you have, the more important asset tracking is for your business.
How do you track physical assets?
By tagging them and scanning labels using Radio-frequency Identification (RFID), Bluetooth Low Energy (BLE), Global Positioning System (GPS).
Centralized systems provide vital information such as maintenance history and real-time asset location so you can quickly determine the total cost of asset ownership.
Asset Tracking Basics For Small Business
First, we need to explain the difference between inventory and fixed assets.
Businesses commonly have a mix of both, and although both seem as assets, they have different roles in financial statements.
The table below shows the key differences between the two.
What assets should you track in your small business?
Track everything that has high-value, as well as movable assets and those that require regular maintenance.
For example, a contractor running a small business should track vans, graders, and bulldozers.
Likewise, you should track things sitting in your office, such as projectors, computers and laptops, other machines and tools, furniture, high-value books, software, and high-value consumables such as gloves or safety equipment.
Now, let’s look at other common terms related to small business asset tracking.
- Acquisition cost -The cost of an asset after accounting for incentives and discounts, but before adding sales tax.
- Auditor – A firm or person who officially examines your business’ financial accounts.
- Asset – Any business resource with a value that can be expressed in dollars and has been purchased for long-term use.
- Active asset – An asset that is used for routine business operations. For example, a computer.
- Inactive asset – An asset that is not in current use.
- Intangible assets – Assets that can’t be touched, hence they have no physical presence. For example, software your small business uses daily.
- Fixed assets – These can be tangible or intangible, and cannot easily be converted to cash. Examples include work in progress or offices owned by a business.
- Asset management – The process of recording and tracking asset data to maximize utilization and minimize cost.
- Barcode technology – An asset tracking method that uses unique barcode stickers that contain patterned numbers, bars, and spaces that identify an item once it is tagged.
- QR Code – A barcode containing black squares arranged in a grid, used to identify an item and store information.
- Bluetooth Low Energy (BLE) – Marketed as Bluetooth Smart, BLE is an intelligent and power-friendly version of Bluetooth wireless technology that allows devices to communicate without cables, while still maintaining high-security levels. The technology uses fixed BLE receivers and roaming asset beacons to track critical assets in real-time.
- Radio Frequency Identification (RFID) technology – An asset tracking technology that uses data-encoded RFID tags, captured via radio waves, to identify an asset
- Useful life – Also known as service life, it is an estimated duration an asset is anticipated to be in use, for the reason it was purchased.
- Disposal – The process of selling an asset that has reached the end of its useful life.
Are small businesses tracking their assets? What are the challenges?
Asset Tracking Challenges For Small Businesses
Three years ago, in 2017, only 16% of the surveyed 1100 small businesses used software for asset tracking, while a total of 55% of small businesses did not track their assets or were using pen and paper for asset tracking.
While these statistics might have changed by now, they still show the untapped potential of asset tracking, an undertaking that could save any small business a lot of time and money.
Without proper asset tracking, your business is set to experience these seven recurring problems.
#1 Asset Theft
Lack of knowledge of all business assets means that you will end up replacing a stolen item that you didn’t know was stolen in the first place, incurring extra costs.
#2 Higher Asset Costs
Other than theft-related additional costs, businesses spend more when they don’t know the current condition of their assets, whether they should be repaired or replaced.
For example, if your excavating machine is not maintained, replacing it after it finally breaks down will prove to be more expensive.
#3 Unhappy Staff
No employee wants to explain to a client that a project’s milestones are yet to be met because the management did not service equipment, or replace an old one.
#4 Low Bargaining Power With Suppliers
In case you need to outsource asset management, negotiations are likely to hit a dead-end if you don’t have existing internal management of existing assets.
How will you negotiate and determine deliverables?
#5 Increased Risks
Workplace injuries and accidents are sometimes a result of poor maintenance, due to lack of a proper assets management system.
For example, poor tracking and maintenance of personal protective equipment (PPE) at the hospital risks exposing employees to biohazards.
Imagine the risk students are exposed to when school management doesn’t service fire extinguishers or know where they are, and a fire breaks out!
#6 Legal Liability
When an accident finally happens, expect an expensive lawsuit, and hope that your business will afford it and still survive.
The U.S Occupational Safety and Health Administration (OSHA) reported that one in five worker deaths in 2019 was in construction.
The fatal four causes were:
- struck by an object
- caught in/between
Research on the safety violations included inadequate respiratory protection, unsafe machinery, unsafe ladders, unsafe scaffolding and inadequate machine guarding—problems that could have been avoided if the affected businesses tracked these assets, and ensured that they were in good condition.
#7 Budgeting Difficulties
How much would you allocate to maintenance, for instance, if you didn’t know what is being maintained, or the number?
You have to have a good overview of your company’s assets so you can properly manage finances on time and never be caught in unexpected expenses.
Now that we explored common challenges and problems that arise from the lack of asset tracking, let’s see how you can track your small business’ assets.
What Small Businesses Use To Track Assets
We already know that about 55% of small businesses in the U.S don’t track assets or use a manual process. The 12% who are using pen and paper might be on the right track, but manual asset management has more cons than pros.
- It is tedious as it requires a physical count of the inventory
- It lacks real-time reporting
- Possesses a high risk of human error
- Requires employees to keep a written log of inventory going out and in, which could be unreliable in case of miscommunication
- It’s too much paperwork
- It results in grumpy employees due to the labor-intensive nature of the job
So, technology is the best way to go, as it solves all these problems, making the work faster, fun, efficient due to real-time results and elimination or reduction of human error.
Here are some technologies to consider.
Barcodes are one of the oldest and simplest asset management technologies.
A barcode is a machine-readable one-dimensional code that uses a pattern of parallel lines and numbers, which is printed on an item.
You must have seen a barcode when shopping. Your daily use product packaging should have a barcode.
Barcode technology is great for these reasons:
- It is inexpensive
- Easier and faster data collection
- It increases data integrity
- It eliminates missed maintenance schedules
- It gives immediate access to the location of each asset
Critics of barcode technology fear that someone can take a high-value asset, remove the barcode, and steal the item.
Well, a different purpose comes into play at this point, which avoids the situation using a high-secured barcode.
Use laminated barcodes for items that are exposed to water and detergent such as office furniture and carpets, and if the asset is too mobile, opt for two-part asset labels.
Quick Response (QR) code technology is an updated version of barcode technology developed in 1994.
It is a 2D variant of bar codes that includes more geometric patterns than bars, such as hexagons, rectangles, and dots.
Any smartphone or tablet can read 2D barcodes data with their built-in cameras.
To the eye, a QR code looks like several black squares and dots, as seen in the image above.
Advantages Of QR Technology
- User-friendly and simple to use
- It is versatile, hence can be used for anything. It can also encode all types of data including binary, alphabets, numeric, and special.
- Eliminates errors and speeds up the processing of transactions
- Cheaper because no extra hardware costs are related. Employees can use their smartphones to check on asset status
- The fault tolerance is good. For example, if part of the code has been damaged, the code can still be used to decode information
QR codes are different from barcodes in 4 major ways:
Smartphones can be combined with asset tracking software. Unlike regular handheld scanners, then QR codes can include a form to select a custom property for inventory transactions. For example, for which project a concrete mixer was issued.
Likewise, status change for any asset can be updated the moment it happens, using one scan of QR code.
The information goes to a centralized database, then the updated status is sent to other connected authorized devices—which allows for real-time collaboration.
Radio-frequency Identification (RFID)
Radio-frequency Identification (RFID) uses radio waves to capture digital data encoded in smart labels or RFID tags.
The technology needs an RFID tag, an RFID reader, and an antenna, directly feeding data into computer systems with little or no human intervention.
The technology is better than barcodes because as opposed to barcodes which must be aligned with a scanner, RFID tag data can be read outside the line of sight.
There are three types of RFID:
- low frequency
- high frequency
- ultra-high frequency
High-frequency RFID can be used to monitor surgical items used when there’s a patient on the operating table. It can even save lives, and prevent lawsuits, by ensuring no sponges are left in a patient, for instance.
If 15 sponges were checked out, they can be checked in after the surgery, accounting for all of them.
Near Field Communication (NFC) Technology
Near Field Communication (NFC) uses a set of communication protocols at a low-speed connection.
Through this, 2 electronic devices can communicate at a maximum distance of 4 cm.
NFC development was based on RFID technology, but the two have key differences.
- RFID can use both passive and active communication while microchips, a type of NFC, relies on passive communication. A passive device won’t have its self-contained power supply, but will instead rely on a reader to provide the power to read information.
- NFC has a shorter read-range, a maximum of 4 cm, while RFID can be read even at 20 feet.
Geolocation refers to any type of technology that can be used to identify an asset’s geographic location. With a computer or mobile device, you can access this information.
We will look at 2 technologies that use GEOlocation to track and manage assets
Global Positioning System (GPS)
GPS is a satellite-based radio navigation system.
Satellites orbiting the earth send radio signals to a GPS device, giving the current location of an asset with accurate coordinates. GPS devices can either know the current location of an asset or the location as per the last time a scan was done.
Every time an asset is scanned, coordinates are captured and asset GPS location recorded.
GPS mostly works with assets having QR codes, where the GPS sensor and connectivity come from the mobile device and not the asset.
To get real-time results, however, businesses use active GPS tags. These can be placed on each asset.
Active GPS should be used for high-value assets.
For example, if one of your two company laptops contains all your trade secrets, client information, and other sensitive business data, attaching an active GPS tag is prudent, as the loss of this information could cripple your business.
Bluetooth technology allows secure wireless communication between devices at close range, and Bluetooth Low Energy (BLE) technology is the power-conserving variant of the same technology.
Beacons devices are mounted in business premises and employees use BLE-enabled smartphones to track assets.
Common ways the technology has been used include:
- Loop monitoring of cleaners in schools and hospitals—triggering safety content or alerts when someone enters a dangerous area such as students getting into the forbidden science lab.
- Sending reminders for routine asset maintenance
- Prompting instructional content when workers are handling dangerous construction equipment and monitoring the location of mobile workers between construction sites or mobile hospitals.
Bluetooth technology is a passive system with security and penetration issues. For example, metal and concrete could interfere with the signal.
Internet of Things (IoT)
Internet of Things (IoT) is a computing concept that combines software, hardware, actuators, and sensors, describing an idea of how daily physical devices connect to the internet and identify themselves to other devices.
IoT is popular in asset management for its numerous advantages. It increases device efficiency, optimizing asset repair and replace cycles, while strategically tracking costs. IoT eliminates human intervention, enabling connected devices to automatically communicate and relay information to the desired destination.
You can transform a typical physical device into an IoT device by installing some sensors, which can be connected to a central monitoring system.
So popular is this technology, that the asset tracking IoT device market is set to triple by 2022.
The technologies seem great, and some sound a bit costly. But, what is your business set to gain?
What are the benefits?
Small Business Asset Tracking Benefits
Small businesses that manage their assets properly will likely see some or all of the following benefits.
- Prevented asset thefts and misplacements
- Reduced insurance premiums, as a result of mitigating loss and theft and having timely asset maintenance
- Better inventory and order management for consumables
- Accurate and reliable maintenance planning
- Better data collection with no human error
- Prolonged asset lifecycle due to better maintenance
- Real-time asset information for decision making, operations management, and peace of mind
- Better maintained assets mean higher negotiating power when selling
- Easier calculation of asset depreciation
- Confidence during audits because of the availability of accurate and detailed records
- Reduced legal liability risks. For example, maintained equipment reduces chances of workplace injury
- Task automation, better workflow efficiency, and increased overall productivity. More scalable business processes
- Happier employees
- A clearer picture of the business’s financial status
- Regulatory management and compliance.
- Better customer service
The benefits outweigh the costs. So, what assets should you consider tracking?
How To Setup Asset Tracking
Before settling on the best asset management solution, you need to assess your specific business needs.
Think about what assets you should manage and why.
What data points are important and what information will you keep in the asset tracking records? For example, software solutions for asset tracking often include custom fields where you can describe your asset, put in the purchase year, its initial cost, warranty expiration date, etc.
Is the cost of implementing an asset management system valuable to the business or will it be expensive in the long run? Consider the full project management life cycle.
Will the technological solution available accommodate your assets and is it economical? For example, do you need QR codes? What labels should you use to tag your assets?
What actions need to be taken on your equipment? How often should they be maintained?
After making these decisions, track assets as you acquire them, eliminating any ghost, stolen, or unusable assets that are still in the system.
Once you’ve set up an asset management system, analyze your performance.
How To Know You Are Successful With Asset Tracking
If you are wondering whether you are doing things right, know that there are some common indicators of a good asset management practice.
Here’s how you will know that you have succeeded.
- There are no ghost assets in your small business
- Your equipment maintenance planning and scheduling is seamless
- Your work environment is safe, with minimal to zero work-related injuries
- Your asset usage monitoring is efficient
- No one is wasting time looking for stuff around the company
- Your purchases are streamlined
- You are successfully preventing asset losses, thefts and misplacements
- You have great audit reports and know you can comply with industry regulations
The fewer assets you have, the more they are valuable to your small business.
Luckily, this could also mean that it is easier for you to count them all and start keeping track of all assets from one centralized system.
It is reported that approximately 78.5% of small businesses survive their first year. 29% of those that fail, fail because they run out of cash.
Asset management could partly solve this problem by safeguarding your business’s assets, and reducing loss, theft, or damage.
Additionally, asset management will keep your business compliant with the law, preventing legal liabilities, and also increase overall productivity, leaving you to focus on higher-value work.
Incorporate asset management in your business today, and increase your chances of survival.