To run a company successfully, the owner has to implement various strategies. Each strategy has strong and weak sides. From hiring the right candidate, to look after the finances carefully, from networking to customer care, the owner has to make sure everything is going smooth. One of the strategies that businesses incorporate is asset recovery. Asset recovery can help a company financially so that it remains strong even in tough phase.
Asset Recovery – Definition
To work smoothly, a company buys various resources. The resources can range from machines, computers, electrical equipment, to furniture and vehicles. All these resources can be helpful for a limited amount of time. After that they lose their usability and starts remaining unused. Sometimes these equipment lose their purpose as their work gets completed. This is where asset recovery can help.
Asset recovery manages to recover the money that were invested to buy the assets that are now lying unused. And how is it done? Let us go deeper to find out.
- Firstly the method of asset recovery involves identifying the unused assets that are burdening the company. The money that was invested to buy the items is tied up because the assets lie unused. The first part of asset recovery is identifying these assets whose values are depreciating day by day. Then the legalities are examined. It is investigated whether the asset legally belongs to the company and how will be the implication of the sale of these assets.
- In the next step, it is examined whether the unused items could be re-used in any other department of the company. For instance if a mobile phone service provider shuts down its business, the first thing asset recovery services can do is to check and see whether the hardware can be used in the company’s internet service providing business or leased line business.
If two similar resources of a company are lying unused because of faults in two separate parts of the resources, one part of the second resource is used to fix the other resource. In this way the percentage of the unused products become half. This process is called cannibalization of usable spare parts.
- Another aspect of asset recovery is Divestment. While investment means spending of money to buy resources, divestment means selling off assets to recover the invested money. Divestment or selling of old assets happen because of two reasons- positive and negative. Let us first consider the positive reason. Imagine a company undertook a job where it has to digitize the ration cards of the people of a developing country. For this, it buys 100 laptops. After the work is finished, these laptops are now lying unused. Hence the money that were needed to buy the laptops is trapped and cannot re-invested. As part of asset recovery, the company sells off these laptops and frees the invested amount.
Again when the company is facing financial trouble, it can sell off its assets to repay the creditors. This particular aspect is employed only after trying everything else to salvage the company.
Asset recovery, today, is immensely helpful in business-restructuring. It helps to keep the finances of the company healthy and financial stability is the backbone of all the companies.