Asset Recovery and Identification: Cost-Cutting Strategy after COVID-19

In the wake of the COVID-19 pandemic, there is a critical need for companies to reduce their operating expenses and improve the state of their cash holdings and cash flow.

One way to do this is through a process called asset recovery.

And here’s a phrase that applies to asset recovery; “Waste not, want not.”

As opposed to the other ways of improving company profitability, asset recovery doesn’t involve negotiating with vendors, cutting spend, or cutting people.

Asset recovery involves a three-step process to recover the value of assets that are not being used to their greatest potential.

This process includes:

— Asset Identification

— Asset Redeployment and Repurpose

— Asset Disposition and Divestiture

In short, this is the corporate equivalent of reduce, reuse, and recycle.  It is a hunt for hidden value in assets a company owns and may not be fully optimizing. Asset recovery is a process, but it can reveal tremendous value.

Asset identification is the first part of asset recovery.

After all, before you can improve the value of an asset, you need to identify assets that are not being used to their fullest potential.

There are many kinds of assets that can be repurposed, redeployed, or divested.

 And they fall into six general categories.

 These include:

— Heavy Equipment

— Office Equipment

— Software

— Inventories

— Physical Plant

— Other Assets

 Let’s take a deeper look at each of these categories.

Heavy Equipment

Some of the highest-value assets that can be identified for asset redeployment, repurposing, and divestiture are capital equipment.

This category of goods includes construction equipment, heavy machinery, trucks, cars, forklifts, backhoes, shredders, oil and gas drilling equipment, and any other heavy assets.

Heavy Duty

There are many different levels of waste that come up in asset identification.

And some of these levels are absolutely ridiculous.

First, some of the goods may not be in use. This would make it possible to repurpose the goods so they could be used. The best strategy here would be to use them or sell them.

Second, some goods might be needed, but they do not work. These could be repaired or sold. Or if they are in really bad shape, they could potentially just be recycled.

Third, some goods might not be in use and not working — but they may be rented. In this case, the company is paying for a rental agreement on broken equipment.

That’s a big waste! 

Reviewing the rental agreement is critical. And exiting the rental contract may likely make the most sense.

Fourth, some goods might be not in use, not working, rented, and with a maintenance or service agreement.

That’s an even bigger waste.

The rental, maintenance, and service agreements should all be reviewed — and potentially exited in part or in total.

Fifth, some goods may be not in use, not working, owned, and with a maintenance or service agreement.

As in the case of rentals, the maintenance and service agreements for this owned equipment should be reviewed and very potentially exited.

Sixth, some goods may be not in use, not working, owned with a maintenance or service agreement, and paying for insurance on them.

These costs should all be reevaluated, and agreements should be reviewed and potentially exited. Once excess equipment is disposed of, insurance agreement terms should be renegotiated.

Office Equipment

Beyond heavy equipment like construction equipment, machinery, and vehicles, there are also various kinds of office equipment that may be identified for potential repurpose, redeployment, or divestiture.

As opposed to vehicles and heavy equipment, this could include lighter, high-tech equipment like computers, copy machines, automated vehicles, robots, or other equipment.

These assets can also be repurposed, reused, or divested.

Software

Beyond hardware, there are also software licenses and subscriptions. Although it seems unlikely that software could be divested, they could be repurposed or redeployed.

Inventories

As with physical assets, excess inventory, inventory that is no longer useful, and inventory that no longer has value can all be considered for redeployment, repurposing, or divestiture.

Of course, some assets will be easier to sell, like commodities. But the value of other assets could still be monetized.

Physical Plant

These are some of the most valuable assets that a company could sell. These could include office buildings, manufacturing facilities, retail buildings, and any other kind of physical building or facility.

Especially if a lot more people begin working remotely on a permanent basis, we could easily see companies look to dispose of office buildings and other forms of commercial real estate.

Other Assets

There is no limit to the types of assets that can be repurposed, redeployed, or divested. Any asset a company is not using to its full value is a potential option.

As you can see, there are many different kinds of assets that a company may be able to identify for repurposing, redeployment, or divestiture.

And a big part of maximizing the profitability of a company is to make sure that you are getting the greatest value possible out of all the assets on your company’s balance sheet — especially the highest-value assets. 

And that’s what happens next — after you’ve identified the assets that could produce greater value.

Strategic Cost-Cutting

This is an excerpt from Jason Schenker's recent book Strategic Cost-Cutting, which was released on 18 April 2020. The book has been a No. 1 New Release on Amazon.

This book can be ordered at www.StrategicCostCutting.com

Jason Schenker is one of the world's leading futurists. He is the Chairman of The Futurist Institute and the President of Prestige Economics. Jason is also an instructor for LinkedIn Learning.

Tags: #Disruption, #Technology, #Innovation, #LinkedInLearning, #SupplyChain, #Business, #Finance, #Economy, #Economics, #Coronavirus, #COVID19, #Jobs, #Work, #Leadership, #Strategy, #Recession, #Profitability, #Accounting