1. PG 40 AFRICA PRINT JOURNAL OCTOBER/NOVEMBER 2014 www.AfricaPrint.com
FEATURE
By Rian van der Merwe
Management
Optimisation
There is a range of different tools used by firms
to ensure that equipment is managed effectively.
Some of these tools are briefly discussed below.
Accounting Tools
The first responsibility of a company is to account
for an asset in their financial accounts. Companies
either buy or rent assets. The accounting process
differs depending on whether the client buys or
rents the asset.
The accounting process mainly deals with the costs
associated with the asset and needs to ensure that
this cost is accounted for accurately.
The only interaction with the physical assets are
controls put in place by companies to ensure that
the asset is received in good working order before
the asset is paid for and thereafter the asset could
be chosen annually to be verified as part of the
external auditor’s function (provided that the asset
is a capital asset).
There are several factors that generally determine
the buy versus lease options:
• Cost of the asset.
• Expected life cycle of the asset.
• Application of the asset.
• Internal return on capital.
• Redundancies.
An asset that is bought cash or on a finance lease
is required to be recorded on the fixed asset
register. This is a general accounting function that
will add the asset to the company’s balance sheet
and depreciate the asset over a period in time.
The depreciation will be passed through the income
statement with a monthly journal that would
reduce the capital value of the asset. An asset
that is on the company’s balance sheet is deemed
to be owned by the company and is subjected to
verification processes to ensure that the company
keeps track of all assets on their asset register.
Assets that are procured through operational
leases remain the property of the lessor. These
assets are also referred to as non-capital assets.
The lessee therefore rents the asset for a set term.
The ownership of the asset remains the property of
the lessor. Non-capital assets are deemed not to be
owned by the lessee who therefore has no official
obligation to constantly verify the asset.
The latest trend in non-capital assets is to
register these assets on a rental asset register
and account for the contract within a contract
management application.
The absence of governance relating to financed
Companies often install systems to monitor the effective utilisation of assets. Such systems
collect data that need to be analysed in line with projected levels. For an asset to perform
optimally, it needs to function within a specified range stipulated by the manufacturer. If an
asset continually exceeds the recommended output, it creates a real risk of fatigue that will
lead to excessive downtime, early termination, etc. Under-utilisation on the other hand poses
a direct cost implication as the asset will not be used at maximum efficiency.

2. PG 41www.AfricaPrint.com AFRICA PRINT JOURNAL OCTOBER/NOVEMBER 2014
FEATURE
assets is a loophole that exists in the accounting
process that clients need to pay close attention to.
There are now new solutions on the market that
will assist companies to manage financed assets
with the same level of governance as that required
for capital assets. These systems will control the
finance contract, enforce annual verification, etc.
Another limitation currently exposed by financial
auditors is the insufficient nature of the general
spot-check verification process. The asset base
of modern large enterprises have become so
excessive that the value of a small spot check
on assets once a year does not offer sufficient
control of secure assets. Within the new audit
principles defined in Computerised Assisted
Audit Techniques (CAAT), companies now find
automated computerised methods to validate
financial controls. Assets are one of the easiest
cost categories to validate and control using CAAT
principles. These techniques will ensure that
your asset base is monitored at all times and that
confirmation can be passed electronically to the
financial accounting process to ensure financial
control of assets.
Utilities management system (UMS)
Utilities management systems gathers data from
the asset during operation. This information is
presented to the user in a range of operational
reports. These tools interact with the asset either
through an electronic interface or through a manual
capturing process. The accuracy and integrity of
the received data is essential for maintaining and
sustaining the asset throughout its life.
Most UMS’s offer bi-directional communication.
This allows the device to talk to the system, but
will also allow the system to talk to the asset.
The UMS can be configured to switch assets on
or off during operational and non-operational
hours, ensure that the latest firmware updates are
constantly installed, etc.
SLA Monitoring (helpdesk
applications)
There is scheduled and non-scheduled maintenance
that is generally regulated by an SLA between the
company and its supplier. Maintenance is generally
classified in three levels ranging from first line
support (elementary, non-skilled support) to third
line support involving highly skilled technicians
and artisans.
The Service level agreement between a client and
the supplier of an asset determines the service
levels that need to be maintained. The latest trend
in SLA’s monitors product availability and controls
the basic procedures with rewards and penalties
so that all acceptable levels of maintenance is
available. Availability is the product of a range of
elements that need to work together to ensure that
the asset is functioning correctly. Some of these
elements are required from internal resources and
some from external role players. An SLA monitoring
tool should therefore monitor the responsibility of
internal and external service providers.
To manage the commitments stipulated in an SLA,
it is recommend that the following simple steps
be followed:
• Split all responsibilities between internal and
external role players. Internal could be IT,
procurement, finance, etc. and external could
be one or more suppliers.
• Document the required process governing the
execution of this commitment.
• Build controls with supporting documentation
to regulate the execution.
• Build these processes into a management
tool.
Business intelligence tools
Business Intelligence (BI) is defined as the set of
techniques and tools for the transformation of raw
data into meaningful and useful information for
business analysis purposes. Business intelligence
tools would rely on data from the above systems
(Accounting packages utilities, management
systems, SLA management tools and help desk)
and process this information within a set of
automated or manual interpretations that would
produce intelligence. All business strategies and
decisions should be based on intelligence rather
than information.
Business intelligence can differ in value. The
following criteria should be evaluated by
companies when applying a suitable BI tool to
assist with the optimisation of an environment:
• Official standards embedded in the
evaluation.
• Qualifications of a supplier’s technical team.
• Past results.
• References.
The implementation of a Business Intelligence
application within any environment changes the
status of that environment from a non-managed
to a managed environment. There is generally a
substantial financial and operational reward when
managing a traditional non-managed environment.
The bigger the environment, the bigger the
percentage of savings one could expect. During the
past twelve years we have been involved in a large
number of projects where we have implemented
management disciplines within non-managed
environments. To date we have not had a project
where the auditable savings did not exceed a 40%
drop in the original cost.
In these projects we have found that a
management system costs between 5-10% of the
TCO of the environment it monitors. There are also
additional costs with the initial consulting and
installation that will absorb around 40% of your
savings in the first year and thereafter, the cost of
these tools will only absorb around 15-20% of the
savings it generates.
Companies buy assets with the exclusive aim to
use these assets optimally in the running of their
businesses. Companies cannot afford for assets to
go missing or to be under-used. It is a company’s
duty to ensure that assets are controlled and
maintained to secure and optimise the performance
of these assets.
Rian van der Merwe +27 (0) 83 257 2601
(+27 11) 234 8116 rian@fine-print.co.za
Companies buy assets with the exclusive aim to
use these assets optimally in the running of
their businesses. Companies cannot afford for
assets to go missing or to be under-used. It
is a company’s duty to ensure that assets are
controlled and maintained to secure and optimise
the performance of these assets.