Rent it and write if off
They say cash is king, but in business the real king is cashflow. According to ASIC, thousands of businesses fail each year due to poor cashflow management. When it comes to your office copiers and IT software, is your business using as-a-service models to help your bottom line? And what exactly does as-a-service mean?
Businesses and offices have changed considerably over the past decade. The way we operate, the systems, software and equipment we use, and our integration of technology into almost every element of the business, is entirely different to how we did it in the ‘80s, ‘90s and 2000s.
As a business owner, manager or IT employee back in the 1990s, it’s entirely possible you would purchase any software or equipment the business required outright. With ongoing servicing and maintenance, that technology would last you up to a decade before needing replacement. Office photocopiers and software were CapEx (capital expenditure) and were big investments particularly for small businesses.
Today, with more financing options available and technology advancements demanding quicker turnover of products, we find the as-a-service model to be a better fit for many. You don’t need large lump sums of cash to purchase items outright. Instead of outlaying $5,000 to $10,000 on a new copier, your business needs to front up with only a small monthly rental fee which you can write off. It’s easier to maintain a lean balance sheet taking the OpEx (operating expenditure) route, even while paying interest.
Even if your business has the $10k cash, that lump sum is often more beneficial to your business in your bank account, as cash equals freedom. CapEx restricts your business’ free cashflow, so if the unexpected happens you could find yourself in a pickle.
In the 2015/16 financial year, external administrators lodged 9,465 reports with ASIC, citing the major cause of failure for companies was inadequate cashflow or high cash use. This reason was cited in 4,318 reports – that’s 46% of all reports. Cashflow management is the number one reason businesses fail, closely followed by poor strategic management.
What’s cheaper in the long term can sometimes be far too costly in the short-term.
Of course, as a business, you don’t want to restrict your growth by being too frugal either. We have fantastic products that can make your business operations smoother and smarter, and help you generate better revenue. What’s cheaper in the long term can sometimes be far too costly in the short-term.
When it comes to OpEx, the first key benefit is of course cashflow. The second is greater flexibility in updating or adjusting your software. With an as-a-service model you are able to be kept up to date with the latest and greatest. We can easily add and remove components such as add security modules or components of Microsoft Office 365, or we can add or remove users from your software fluidly as your team size fluctuates.
Of course, there are occasions when CapEx will be the better path for some businesses. Particularly businesses that have excess budget they need to spend before they lose it forever, namely in government organisations or not-for-profits.
It really comes down to looking at your business needs today and tomorrow, and finding the best option to help you grow. Contact our team today to discuss the many options available to rent across your business technology needs.