3 Elements of Asset Recovery

11 Jan by Rich Waryn

In 2018, consumers worldwide bought more than $2.86 trillion worth of products online. However, people aren’t just buying products online. Renting and leasing industries have also migrated to the digital world. Consumers now go to the internet in droves to rent or lease furniture, medical equipment, cars, and more. Many of these businesses also offer custom packaging designs, with in home delivery or delivery to medical offices.

Anytime a company rents out products to consumers or businesses, it must perform a process called asset recovery when it’s time to reclaim its product from renters.

Asset recovery is also known as resource or investment recovery. Besides companies renting out products with in home delivery, asset recovery can also be performed by any company to reclaim lost or stolen goods, or to make the most of unused product during business liquidation. Specialized software may be used to help track and manage asset recovery during any of these processes.

There are three main elements involved in asset recovery: identification, redeployment, and divestment. The following is a brief look at each of these elements in detail.

1. Identification

Assets not currently in use cost money just to keep them. This can make them a drain on an in home delivery business’s funds. Because of this, a business will hire investment recovery personnel to find and classify unproductive or missing assets.

Surplus, unused assets can come in any form—including mobile equipment, fixed equipment, and even buildings and land.

After assets are identified, the company will decide whether to redeploy these assets—putting them back to work in places where they’re actually needed—or divest (basically get rid of) them.

2. Redeployment

If a business decides to redeploy assets, it will move on to this step. Redeploying is usually the most productive and profitable decision for unused assets.

Usually, an asset will be taken to another part of the company where it will be more useful. This saves the company money because it removes the need to purchase new assets at present market rates. To be effective, the other part of the organization must need an asset of that particular kind, and the asset must be practical to transport to and deploy in the new location.

One form of redeployment is cannibalization of usable parts—in other words, using the internal mechanisms or components from a machine no longer in use, to repair or upgrade a machine that is being used. This will often be done in factories and warehouses where cars or trucks are built, stored, or rented.

In the case of in home delivery companies offering rental furniture and equipment, redeployment might simply mean repairing or cleaning product, then putting it back out to be rented again by someone else.

3. Disposition

After identifying unused assets, a company may choose to divest assets instead of redeploying them. This is usually done when no appropriate or needful use of the asset can be found within the company.

When this is done, it’s called disposition—the third element involved in asset recovery.

Disposition of unused or unnecessary assets involves selling off, recycling, scrapping, donating, or disposing of assets. This means removing the item from the company’s records as if the asset had never been owned by the organization. Ideally, the business will receive some amount of financial compensation from the source where they divested the asset, which will be invested back into the company.

Done properly, a business will usually gain something from disposition of its assets. Good asset sales can produce revenue, boosting profits. Donations can build goodwill towards the organization, and incur tax benefits.

The method of disposition or divestment chosen will depend on the asset’s type, value, and market demand.

Conclusion

These are the three main elements involved in asset recovery. Hopefully, this article has helped to give you clarity on how asset recovery can help you in your area of work.

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