Nothing is more true than the fact that IT moves quickly these days!
Part of keeping up with IT and the rapid changes is making sure that your business has the right equipment to do the task.
In this article we will be providing a few ideas for how to make a plan/budget for new or replacement equipment, as well as offering you some information on leasing.
Firstly budgeting for IT hardware
Most businesses will have a budget for IT hardware and other goods and services that they need to operate.
Our advice is that if you have more than a handful of computers, you will benefit from forecasting and budgeting for IT expenditure.
Once your business is established, there is a very good chance that you will need to replace your IT equipment every few years. Such a good chance, in fact, that you can plan on it!
Drawing up an IT replacement schedule helps you plan well, and helps ensure you have the funds when you need them.
This can be done in conjunction with your IT Alliance member. If they don’t have a list already, they will do an audit of the IT equipment that you have, the date it was installed, and therefore when it is likely to need replacing based on its expected life.
This asset management plan needs to be revised every year for budgeting purposes.
We strongly suggest that you do this years in advance of when you actually require upgrades. It’s not hard to do.
This list can help you have a clear and actionable plan on existing equipment, when warranties expire, and the requirements for a staggered plan for new hardware.
A look at leasing
Whilst many of our clients purchase outright as the overall cost is lower, leasing can be a good option for when you are starting out, if your business is expanding rapidly, or if cash flow is wrapped up in other parts of the business.
Leasing turns capital expenditure which has to be depreciated, into a monthly payment that is immediately expensed. It can also be an advantage in keeping assets off your balance sheet – speak with your accountant or advisor about this.
Obviously the disadvantage of leasing is that you are using someone else’s money and so they will need to charge you for that, as well as for their efforts! You could arrange your own finance and purchase, instead of leasing, in which case it pays to do your research on interest rates.
Upgrading your technology for modernisation and expansion and to get more reliable up-to-date technology is very important, as using outdated technology can cost money and time (and expensive IT call outs!). Sometimes it is a case of weighing up your options here.
Using leasing options, your business may be able to move forward more quickly then it otherwise may have been able to, financed in a way that suits your budget or cash flow.
Whilst leasing is more costly than buying in the long run, one of the advantages is that you can establish predictable payment structures aligned to your needs, taking the stress out of an upfront payment.
This all means that you can get the technology you need with the budget you have today by utilizing IT leasing arrangements.
“When I became self-employed 20 years ago, I got my first laptop and setup via Flexirent, as it meant I didn’t need to spend the cash and then have the asset/depreciation. Instead, I kept the cash, and the entire cost was a relatively small monthly expense. So, sometimes, especially for new start-ups, it means you can save your cash for something you do need, or as a reserve. For more mature companies, taking a lease for gear, means that the cash can stay with you, which can help with liquidity.” Comment from ITA member.
These are just a few of the leasing options that some of our IT Alliance members use. This is by no means conclusive, and we are not aligned with any of these companies. All of our advice is simply that, advice. Please make sure you do your own thorough research on this subject. Never before has the saying ‘read the small print’ been more applicable. We strongly advise that you speak with your financial advisor and or accountant about this.
|From Fee Funders website: Your business receives 100% of the customer invoice paid upfront, whilst your customers enjoy the flexibility of monthly installments.
Fee Funders manages the monthly customer’s payments by direct debit over three, six, nine or twelve months .
Your business achieves upfront cash flow at no cost.
Your clients pay a basic interest rate to achieve a spread of their outgoings.
It’s like outsourcing a spread payment option for free!
|Flexicommercial offers your business flexible equipment finance solutions.
The credit criteria for finance varies depending on whether you are an existing or new business and the required amount of finance.
Of course these are just suggestions and all leasing arrangements should be thoroughly considered before being entered into.
Hint – Leasing companies will usually be quite happy to include IT engineer setup costs in the value of the lease. For larger or more complicated systems, this can be quite a substantial part of the project costs. This means you can also expense those costs as well.
Working closely with your IT Alliance member to do an audit of your current equipment, and make a plan for future expenditure, makes good business sense.
Something that makes this type of IT cash-flow of forecasting easier, is if you work with an MSP (managed service provider). Being on a Managed Service agreement removes many of the fluctuations of IT budgeting as generally you pay a fixed monthly fee for IT support.
Please feel free to reach out to your IT Alliance member to discuss this further.