'Deferred Maintenance' is explained in detail and with examples in the Corporate Finance edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Deferred maintenance proves to be the action of putting off maintenance procedures that are needed and routine on both personal property, such as machinery, or real estate property, such as infrastructure. This is done to save on expenses, to reassign money that is available in the budget, or to achieve the available levels of budget funding.
The downside to this avoidance or delay of generally needed repairs is that it causes the deterioration of assets, and finally their total impairment, if continued for an extended period of time. Usually over time, the practice of constantly deferring your maintenance will end up with greater costs in the future, the eventual failure of assets, and from time to time with safety and health concerns resulting.
Maintenance is one of the budgetary items that is forced to battle along side other needs’ and programs’ funding. Since the money is simply not always available for the category of maintenance’s use, it is often short changed. Other times, the money is available until it is directed by management to higher priority assignments and requirements later.
Maintenance that is deferred is most usually not reported to the necessary parties right away. Many times, it is never even reported at all. Such deferred maintenance that goes on over a lack of funds appropriated to the cause will finally lead to a greater number of incidences of inefficient service for the public, possible safety dangers, operations that are inefficient and ineffective, and greater costs overall at a future point in time.
Examples of personal deferred maintenance and business deferred maintenance cases abound. Deferred maintenance in a home would include delaying the car’s recommended one year inspection or tune up, or not having those repairs done that the mechanic recommended. As a result of this, the car will likely not operate as effectively or efficiently. It could also suffer mechanical or electrical failures or even become involved in an unnecessary crash over safety issues.
This term of deferred maintenance is more commonly used with large corporations or governments though. A large corporation slashing its budget might result in the company’s plants and equipment not undergoing their annual cleaning and refurbishing.
The firm might get away with this for a year or even two. In time though, problems will begin to show up in machinery break down, equipment misses and failure, and possible shut downs of the plant, if this practice of ignoring critical plant maintenance is put off much or for too long.
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