Published: April 23, 2025  Updated: April 23, 2025

How to Improve Asset Useful Life and Maximize the Asset Lifecycle

Within any organization, effective asset management remains a crucial factor in financial health and operational efficiency. Tangible property that contributes to the generation of revenue plays a vital role in day-to-day operations. However, as with everything else, assets have a finite lifespan. This useful life dictates the period during which you can expect them to function effectively and generate economic benefits.

You need to understand and strategically manage the useful life of assets to receive the most value. In this article, we'll cover the following points:

⮚ Types Of Asset Depreciation.

⮚ The Benefits Of Tracking Asset Useful Life.

⮚ Ways Of Determining Useful Life.

⮚ Examples Of Asset Useful Life Estimates.

⮚ Best Practices To Follow To Improve Asset Life.

⮚ How A CMMS Helps Extend The Asset Lifecycle.

Understanding Asset Depreciation Over Time

The concept of depreciation recognizes that the value of an asset diminishes over time. Causes include wear and tear, obsolescence, or other factors.

What type of depreciation method do you use? That's up to the individual company and their needs. Each impacts the asset's value over its useful life.

For instance, the straight-line method spreads the cost of the asset evenly over the lifespan. Accelerated methods recognize a more significant decline in value in the early years.

Accurately estimating the useful life of an asset allows for the selection of the most appropriate depreciation method. You're looking for a realistic representation of the asset's value on the financial statements. This not only fosters transparency but also impacts tax implications.

The Internal Revenue Service (IRS) utilizes useful life estimates to determine the amount of depreciation an organization can claim on its tax return. A longer useful life translates to a lower depreciation rate, potentially reducing taxable income.

For more discussion of depreciation, read an article from the University of Tennessee Institute for Public Service.

Discover how streamlined maintenance processes can elevate production. Learn more.

Why Tracking Asset Useful Life Matters

• Enhanced Financial Planning. Knowing the expected lifespan of assets enables businesses to budget for replacements proactively. This prevents financial surprises and ensures a smoother cash flow when the time for asset replacement arrives.
• Informed Decision-Making. Accurate estimates empower organizations to make well-informed decisions regarding maintenance schedules, repairs, and replacement strategies.

Instead of blindly clinging to outdated equipment, businesses can better allocate resources for maintenance. Or they could invest in newer, more efficient models based on depreciation values.

• Tax Optimization. As mentioned earlier, a clear understanding of useful life allows for the selection of the most appropriate depreciation method. This could potentially lead to tax savings.
• Improved Operational Efficiency. Effective asset management helps to minimize downtime and disruptions caused by equipment failures. As you'll read later, implementing preventative maintenance (PM) can ensure assets remain operational for extended periods, maximizing their productivity.
• Safety. As assets age, you risk more things going wrong. Again, PMs can spot potential problems and risk injurious incidents to other assets or employees.

Ways of Determining the Useful Life of an Asset

Unfortunately, a foolproof method for pinpointing the exact lifespan of an asset doesn't exist. However, let's discuss a combination of factors that affect an asset's lifespan.

• Manufacturer's Estimates. This makes for a good foundation from which to start. Manufacturer's documentation often includes estimated lifespans for their products. This information provides a baseline for further analysis.
• Usage Patterns: The intensity and frequency of asset utilization significantly impact its lifespan. For example, a delivery truck used daily for long-distance deliveries will likely have a shorter useful life. Compare this to a backup generator used only during occasional power outages.
• Asset Age. Over time, all assets experience wear and tear. You must factor in age when determining the estimated remaining time of useful life.
• Technological Advancements. The ever-evolving technological landscape can render assets obsolete sooner than anticipated. Consider the potential for newer, more efficient models to disrupt the market and impact the functionality of existing equipment.
• Maintenance Practices: Do you practice reactive maintenance? The kind where you don't pay attention until the asset breaks down? Regular and thorough maintenance plays a critical role in extending the lifespan of any asset. Proper maintenance helps prevent breakdowns, minimizes wear and tear, and ultimately, allows the asset to function optimally for a longer period.
• Environment. Do you use the asset indoors in a sterile room? Outdoors exposed to the elements? Ambient temperature plays a role. For example, Alaskan winters compared to Texas summers.

Real-World Estimates of Asset Useful Life

To illustrate the concept of useful life, let's look at examples of typical lifespans for various asset categories. Keep in mind the following represent estimates. Review the above factors. They affect how long an asset lasts.

Commercial Buildings. You can generally expect them to last 30-50 years. Here we have another factor in the mix—the quality of construction materials.

Computers. Rapid technological advancements have a significant impact on computer lifespans. Typically, a lifespan of 3-5 years. Some high-end workstations may function effectively for a longer duration.

Delivery Trucks. With regular maintenance, delivery trucks can last 5-7 years. However, factors such as driving conditions, load capacity, and engine type can influence this estimate.

Machinery. The complexity and usage patterns of machinery significantly impact its lifespan. Generally, industrial machinery can function for 7-10 years. Some heavy-duty equipment lasts even longer.

Office Furniture. Well-maintained office furniture can have a lifespan of 10-15 years. The choice of materials, the intensity of use, and proper cleaning practices all influence this timeframe.

Best Practices for Extending Asset Life

Understanding the factors affecting useful life empowers organizations to implement strategies that maximize an asset's productive lifespan. Here are eleven best practices to consider:

1. Implement a Preventive Maintenance Program. Schedule regular maintenance based on manufacturer recommendations and asset usage patterns. This proactive approach identifies and addresses potential issues before they escalate into major breakdowns.
2. Train Operators on Proper Usage. Develop a skilled team. You might have specialized crews or crafts. Equipping employees with the knowledge and skills to operate assets correctly minimizes misuse and accidental damage.
3. Collaborate with Production Personnel. Equipment operators should know when to recognize problems and report them. They might execute simple PMs. They should have training to properly use safety measures during their shift. This training also includes proper operation of the equipment. Too slow, too fast, or for a different purpose than its original design can deplete the time of useful life.
4. Maintain a Clean and Controlled Environment. Exposure to dust, extreme temperatures, or humidity can accelerate wear and tear. Maintaining a clean and controlled environment protects assets and promotes their longevity.
5. Practice Smart Inventory Management: Rotate stock and avoid the overuse of specific assets. This helps distribute wear and tear more evenly.
6. Invest in Upgrades When Necessary. Upgrading an asset with newer components or software can extend its useful life and improve its efficiency. Evaluate the cost-benefit analysis before implementing upgrades.
7. Monitor Asset Performance. Track equipment readings. Document key performance indicators (KPIs) associated with asset functionality. Both aid in the early detection of potential problems.
8. Maintain a Spare Parts Inventory. Having readily available replacement parts minimizes downtime during repairs. This not only keeps assets operational but also helps to manage maintenance costs effectively.
9. Document Everything. Maintaining detailed records of maintenance history, repairs, and usage patterns for each asset provides valuable insights. You use this data to refine maintenance schedules, identify trends, and make informed decisions regarding replacements.
10. Leverage Technology. Implementing a Computerized Maintenance Management System (CMMS) streamlines maintenance tasks, automates scheduling, and facilitates data collection. Read on for further details.
11. Foster a Culture of Asset Care. Organizations should cultivate a culture that emphasizes the importance of proper asset care among employees. This can involve training programs, incentive structures, and clear communication regarding the value of responsible asset usage.

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How CMMS Software Supports the Asset Lifecycle

CMMS software acts as a great sidekick to your maintenance team.

• Automated Schedules. CMMS helps create and manage preventive maintenance schedules. You can base this on the aforementioned equipment readings.
• Detailed Work Orders. Clear instructions and work history with accompanying attachments ensure technicians understand their tasks.
• Inventory Management. CMMS tracks spare parts. Updated quantities. Purchase requests generated when quantities reach a minimum threshold. A supervisor can organize the stockroom within the system, having a location for every part and supply.
• Performance Tracking. Data collected by the CMMS helps analyze asset performance and identify potential problems before they evolve into major issues.
• Reporting and Analysis. Generate numerous reports for analysis. Top failures for equipment. KPIs. Equipment readings history. Costs. These help show where you can make improvements in your preventive maintenance procedures.

Strategies for Maximizing Asset Longevity

Improving the useful life of assets is part of maintenance management. By understanding the different aspects and duties involved, you can have better oversight over what keeps equipment running efficiently and for longer.

Switching from a reactive mindset to preventive practices extends asset life. You'll experience fewer unplanned downtime incidents and reduce costs.

Using a quality CMMS organizes a lot of your maintenance practices. Find one that will have asset tracking, inventory management, and plenty of relevant reports.

Mapcon Technologies has mastered that type of system. For over forty years, we have helped companies throughout numerous industries thrive by helping them achieve maintenance management success. Call now for a free demonstration. 800-922-4336