All entries for Tuesday 05 July 2016
July 05, 2016
At the end of year financial statement are prepared to present financial position of any organization. One reason is that it is important to gain the confidence of shareholder and other reasons are that according to accounting standards it's compulsory to show financial position of the company at the every year end. In those financial statement assets value is stated and its existence is confirmed through audits. But who is supposed to show that how are those assets being managed, how well are they being maintained, what impact those assets are having on environment and what steps management is taking to minimize those assets, how much health and safety effects those assets are causing to employees operating them and how security and utilization of those assets are ensured. These all are important questions and concerns for management. Because assets constitute a significant proportion of any company balance sheet's value. It's important to report on the facilities performance as well, as how many near misses have been caused by an interaction of untrained or ill maintained machines. Are the assets being fully utilized or not, this helps management to identify if their project is being over-invested or under invested. For example, if current assets are not being fully utilized and new assets are purchased this represent over investment, and this is not the best interest of shareholder's as this is never going to maximize the shareholder's wealth, in fact, this will increase their opportunity cost. Reporting helps to identify the improvement and do a comparison of asset utilization and internal performance on a yearly basis. I think facilities management can become even more effective if it is made more attractive to compulsory to report on the facilities management. This would be in best interest of shareholders, will persuade management for the planning of better utilization of resources and will make organizations investment efficient organizations. As the life of assets will be prolonged due to better maintenance and organizations will be able to retain employees as well.