All entries for July 2016

July 10, 2016

Facilities management defying accounting standards

IFRS 16 is an international accounting standard related to Property, Plant and equipment. It defines which expenses should be treated as an expense and which should be capitalized(considered or included in a balance sheet as an asset). It states that any expense which improves efficiency, performance or output of an asset should be treated as an asset. Whereas maintenance and training expense is treated as an expense. It's important to note that if untrained employees operate an ill-maintained machine, this will result in regular breakdowns and injuries to employees and regular breakdowns will decrease the performance of an asset, life and efficiency of an asset by a significant margin. But if a well-maintained machine is operated by a well-trained employee, in this can well-maintained machine can be used for a slightly longer period of time as compared to its given useful life. That slight increase in asset life would be due to better maintenance and training of employees. But these spendings are expensed out. I believe there must be a portion of such expenses which should be capitalized as this is an enabling asset to maintain or improve its performance. As its performance should deteriorate as an asset depreciates but neutralizing or minimizing that deterioration till some extent is an improvement in assets performance and life. I think either some part of maintenance and training of employees should be capitalized or a new definition should be drafted for IAS 16.


July 06, 2016

How important is Knowledge

Knowledge had been used in past to educate poeple to address current and future problems of society. People with knowledge were higly regarded. It is said that fruitfull trees are always bent to let others pluck the fruit. Poeple with knowledge were considered as the fruitful trees of their socitiey and their fruit which they let the society pick was their knowledge. This is important because according to my personal view, humans have element of wilderness without knowledge, by wilderness i mean to say unpredictablity of what they want to do and what they actually do. They are in total state of confusion which makes their future uncertain. This is because they dont possess the basic guidelines of knowledge to lead their lives. But knowlegde calms down human behaviours(most of the times), and makes them more predictable as knowledge provides some ground to start process of thinking and innovating which assists in social adn economic developement of human race. Why some socites are developed and devloping, according to my point of view one obvious reason is the aggregate knowledge they possess.

As systems and processes are developed and run by humans, they are impoacted by human behaviours as well. Unstable and unpredictable systems are never let you plan ahead. In order to draft and apply effective plan its important that systems need to be predicatble and stable. Abnormal variation or unpredictability in the system can be enemy of quality and quality is one of the important competitive advanatage, which a company can have. Quality processes helps incerease efficieny of resource utlization and satisfy customer needs. Proccesses need to be integrated through a framework of knowledge which decreases the friction between processes and act as a joining element of processes and human interaction towards processes and humans. Knowledge provides a famework of drive out unprodictability in systems, which helps in better implementations of strategies on system. If i define knowledge in more moderate terms, knowledge is like a software of any hardware(system). What so ever technical specifications(assets) hardware have, its almost ineffective without relevant software(knowledge).


July 05, 2016

Increasing application of Facilities management

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.


July 01, 2016

Facilities management

Facilities of many organisation accommodate very expensive assets in form of machines,vehicles, and IT system. Facilities also accommodate humans who interact with those assets to operate them and to carry out operations. To manage both hard and soft infrastructure in orgaznaition along with thinking to deliver quality to customers. What normally happen is maintenance or safety of employees are done as a reactive function, like when management wait until anything goes wrong and then fix it. Reactive management in this regard is an expensive and ineffective way of dealing with facilities. Facilities need to be made self-sufficient in assisting management in maintaining them, provide a safe and healthy environment to its employees , have minimum impact on the environment. Facilities need a lot of investment to erect infrastructure to accommodate machines, adn employees. Better space utilization can also save space and hence investment on facilities. Cost effective facilities can help a leader to invest the excess funds somewhere else to diverse risk or to use it when an expansion is required.

Human and machines need support services to perform core activities, like eating, cleanliness, better lighting, repairing and powering services to run the operations. For that support services need to be managed and planned ahead of as well. Better infrastructure design of facilities can help save space and cost of development and operations, like a design of using sunlight in daytime can save electricity cost and reduce carbon footprints as well. If an asset is not being used for a while management need to think about it, instead of letting it rust so economic benefit can be derived out of it either by leaving it out or dispose of. In order to deal with all these elements in an organized way, academics and industry are increasingly realising the importance of facilities management. These are a lot of tools which assists in embedding quality and flexibility into processes. According to my understanding so far, FM will become on the important and effective way of achieving those targets.


July 2016

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