Why Public Sector Companies use Asset Management to be effective
The public sector has faced unprecedented funding and staffing cuts over the past 7 years, yet demand for services continues to rise. Public sector companies in 2017 struggle with pay freezes, wages capped to below inflation levels, low staff morale and heavy regulatory requirements. When such a system is pushed to its limit, public sector is exploring the role of digitisation to enhance its overall asset management system.
The Public Sector (or as it is often referred to, “The Government”) is responsible for delivering all Public Services within the UK. The public sector is funded via taxation — direct and indirect, local, regional and national — and in some cases, other revenue earning activities. Approximately 5 million people — one-quarter of the working-age population — are employed by public sector companies.
The biggest and most recognisable public sector company is our National Health Service, the NHS. Healthcare, Social Care and Education are allocated the most funding, but the public sector covers a huge range of areas. This includes government agencies such as The Ministry of Defence, HM Treasury and local councils but also tourism promotion, criminal justice and international development.
in this article, we’ll cover:
Long on Demand, Short on Resources
The public sector in 2017 faces significant challenges. All levels have seen savage cuts — between 2010 and 2015, there have been cuts of 37% in funding to local authorities — leaving public sector companies fighting to do more with less.
It is estimated that local councils will face a £6 billion gap in funding by 2020, due to rising social and healthcare costs for an ageing population. The government’s continued commitment to austerity leaves little chance of this changing in the near future.
Staff cuts go hand in hand with funding cuts. The Office for Budget Responsibility predicts close to a million jobs will be lost between 2010 and 2020, with 400 000 lost between 2010 and 2015 alone. Demand for public services, and for more personalised public services, continues to increase across the board. The workforce available to fulfil this demand, however, decreases year on year.
For those still employed, pay rises capped at 1% have been in effect since 2013. In September 2017, Theresa May raised these caps for police officers (2%) and prison officers (1.6%) but these remain well below today’s rate of inflation. (2.9%). The public sector again is forced to do more, with fewer, lower-paid workers. Unsurprisingly, morale across the public sector is at a low.
Multi-faceted Regulatory Environment
In recent years, we have seen an increase in public services being outsourced to the private sector — Capita, G4S, Serco, for example. The public sector is not given a free pass for grinding bureaucratic processes and outdated technology. Public sector companies face many of the same challenges as those in the private sector and are increasingly held to the same standard.
Another challenging aspect of the public sector is the stringent regulatory burden it faces. Taxpayer funding must be correctly accounted for at all times. Public sector companies from across the board manage sprawling asset portfolios — property, vehicles, IT, specialised plant and equipment, software licenses and of course, direct funds.
Clear audit trails, purchase/repair/sale history and strict tender processes are required and generate phenomenal amounts of paperwork. Specialised and general administrative posts make up approximately 3 million of the public sector’s 5.4 million staff.
This snapshot of the public sector shows companies struggling to meet public service demands and administrative burdens with ever-decreasing resources. Low morale and no future funding increases predicted foster an environment where cost-cutting and putting out fires are chosen over investment in systems and infrastructure.
Cost Efficiency Expectations
Efficient asset management can’t solve the public sector’s funding crisis, but it can ease many of the related problems. First and foremost, creating a clear map of current assets and liabilities. A government body can have hundreds of properties scattered around the country — the Department for Environment, Food and Rural Affairs (DEFRA) have over 200 properties across England, Wales and Scotland.
Ensuring asset management is centralised within asset management software avoids knowledge being lost with staff turnover and data getting caught in silos.
Asset Management Resources, a provider of asset inventory services, states that “After 14 years of experience, AMR has repeatedly found that 65% of fixed asset data is incomplete, inaccurate, or altogether missing, while 10% to 30% of fixed assets are no longer owned.”
Implementing asset management software, whether physical assets or software assets, brings savings across the board. “Ghost” assets on the books, poorly calculated depreciation, unused software licenses — common issues across public and private companies, which can be largely eliminated with efficient asset management.
IT departments report savings of up to 30% upon adoption. With a complete picture of an asset portfolio, opportunities can be identified and financial drains staunched.
Stringent Compliance Benchmarks
Modern asset management software allows data entry and manual processing to be largely automated. Taking inventory of assets feeds into a centralised system that can be kept up to date. By removing these tedious burdens from administrative staff, this frees up more valuable time for more pressing responsibilities.
Using asset management software also improves regulatory compliance. Required maintenance and repair can be planned to schedule, with a historical record created that staff and auditors can immediately check. This is especially important in health-critical public sector organisations such as the NHS.
Finally, efficient asset management enables efficient resource planning. Asset management and enterprise resource planning software penetration in the private sector depends heavily on industry, with real estate and IT/software leading the pack. As so many public sector companies manage large portfolios of both property and IT assets, they are turning towards the same solutions.
With a clear picture of a public sector company’s current asset landscape, investments can be allocated intelligently instead of being used to put out the nearest fire.
Who Implements Asset Management Software?
The NHS has made good use of asset management software. Due to the specialised requirements of the healthcare sector, some NHS trusts have selected custom asset management software for their needs. Blood360, the leading Electronic Blood Tracking system in the UK, is an example of such as specialised case. Blood360 was introduced to remove the most frequent issues during blood transfusions caused by human error.
Another such specialised software is CES360, asset management software for community equipment services. This software uses bar code tracking for all community equipment, schedules maintenance and repairs, and reduces patient waiting times for equipment.
While specialised software is required in specialised cases, savings can be made with a more off-the-shelf approach. Over 80 central government organisations and shared services centres and 200 NHS Trusts use Real Asset Management to reduce their administrative burden and comply with IFRS requirements and HM Treasury Guidelines.
As the funding issues in the public sector show no signs of easing, greater efficiency is the only way to do more with less. Both in the private and public sector, efficient use of asset management software has been shown to reduce tax burden, reduce time spent on administrative tasks, identify opportunities and risks earlier and improve compliance with regulatory requirements.
Any public sector company not yet using asset management software should assess if their asset portfolio could benefit from its adoption.