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Optimizing asset disposal for business efficiency is absolutely critical if you want your cash flow to remain healthy and your balance sheet to look strong. How can you do this in the right way?
That’s what we discuss in this post. We run through some of the strategies you should use if you want to make the most of your assets and handle end-of-life cycles efficiently. Here’s what you should do.
Conduct a Lifecycle Audit
You’ll want to start by conducting a comprehensive lifestyle audit. You can’t optimize inventory that you don’t know anything about, or that you don’t know you have. To create an efficient pipeline, you need to shift from reactive disposal to proactive lifestyle management. For example:
- Identify all of your ghost assets. These are items that you can see on your general ledger but are actually missing or unusable when you go to check them in reality. Keeping them off the books ensures that you’re not paying for insurance and taxes unnecessarily.
- Categorize by depreciation. Some assets will give you significant tax savings, while others won’t. Knowing what these are can quickly improve your financial position.
- Track from procurement to retirement. These days, you can get all sorts of software for this, so you can manage equipment life cycles efficiently without having to worry about keeping track of everything on a spreadsheet.
Prioritize Bulletproof Data Destruction
Asset disposal also means getting rid of data you no longer need or use. IT asset disposition and physical disposal is only half the battle. Digital disposal is where many of the real risks for businesses lie.
Don’t simply drag files to a digital trash bin and assume that the data has permanently been erased. In almost every case, that’s not true. True erasure requires a deliberate process to completely overwrite and destroy the existing data if it’s no longer needed or if keeping it around isn’t safe.
Make sure you use military-grade wiping. Ensure software wiping meets established standards like NIST 800-88. Also avoid failed drives. Sometimes, if a drive fails, you can’t securely wipe it electronically. In these cases, you’ll need to make sure you have a process in place to destroy it completely physically so that it can’t get into the wrong hands.
If you run a larger organisation, it’s well worth requiring certificates of destruction. These can be circulated internally to tell various stakeholders that pieces of data have actually been destroyed properly.
Maximize Value Through Resale
Sometimes it’s a good idea to maximize value through resale. Often, you can get more than the salvage cost for specific items, especially if they still have useful life left in them. For many businesses, resale becomes a secondary revenue stream. Furniture, technology, and machinery depreciate rapidly, but they don’t lose all their value overnight. This means you can often sell them to buyers when they’re no longer marginally productive to you but could be useful for somebody else in a different industry.
- Assess the fair market value and work with brokers to determine how much your equipment and other physical assets are worth.
- Establish a remarketing pipeline where you can advertise the goods that you sell to other businesses or people who might need them.
If that sounds like too much hassle, you can also send used equipment and furniture to third-party resellers who will take care of the resale for you. Just be aware that you might not get as much money for your equipment as you would like.
If you have recovered capital, reinvest it. End-of-life assets can be used to provide money for fresh procurement.
Embrace the Circular Economy
An even more cost-effective method is to embrace a circular economy. This isn’t always available for a lot of products and machinery, but it could be possible in your enterprise, depending on your setup.
For example, let’s say a piece of equipment no longer meets the high-performance demands of your engineering or design team. Even so, it may still be valuable to your warehouse staff or administrative team. This type of cascading depreciation is useful, especially for computer components. You can quickly hand off from one department to another, depending on their different requirements, only with the freshest and most up-to-date equipment where it is needed in your business.
If a machine is dead, you can also harvest it for its components. For example, if a computer dies, you can take the graphics card, RAM, and hard drives out of it and use them elsewhere, perhaps in a server rack.
Sell Your Vehicles
It can be a good idea to sell your vehicles if you run a business, especially if you’re not leasing them. For example, you might want to sell your campervan if it’s no longer serving your company.
When you sell more of your vehicles, it removes the depreciation drag on your business. Depreciating assets will destroy your balance sheet over time. Getting rid of them when you can, as long as they’re not operational essentials, can be helpful. It can improve your financial position significantly. As for vehicles, the resale price is often relatively high, especially compared to furniture and computer equipment.
Make Sure Your Disposal Rules Align With Your ESG Goals
If your business has ESG goals, you’ll need to make sure that your disposal rules align with them.
For many businesses, efficiency is no longer measured simply by profit margin. It’s also counted in the currency of corporate responsibility. Environmental, social, and governance (ESG) criteria are core to investor and partner decisions.
If you have a lot of electronic waste, your business will be viewed as harmful to the environment. This type of waste always adds mercury, cadmium, and lead to the soil and potentially groundwater, so processing it properly is completely essential.
You can also use your focus on ESG goals to leverage PR value. Incorporate these metrics into your sustainability campaigns and demonstrate a verifiable commitment to responsible asset disposal. The more you can do this, the more trust in your brand you’ll generate, and the better your reputation will be.
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