Technology is expensive.
There’s no way around it. Servers, storage, computers, routers, software licenses, infrastructure, maintenance – you name it; I.T, can be an expensive, albeit necessary, part of running a business in the modern world. Furthermore, technology is improving at such a rapid pace that obsolescence happens more quickly than ever before. With such rapid growth in technological innovations, and the expensive price tags associated with them, why do so many companies still insist on spending their hard-earned capital in equipment most likely destined to become paper weights in a few years?
Well, for most businesses investing in technology is assumed to be good business practice. “Why finance something you can easily pay for with cash?” is a common mentality among business owners. And, usually, that is correct. Property, for example, is typically a very good investment as most properties can appreciate (or increase) in value over the course of time. Similarly, acquiring new buildings can appreciate in value over time. These capital expenses are essential for the strengthening of any business.
Technology, however, is a bit different than traditional capital expenditures. While things like buildings and property may appreciate in time, technology rapidly depreciates.
One incredibly effective way to mitigate the risk of technology obsolescence is through financing technology based purchases.
Instead of a large initial cash outlay on the latest technology, thus significantly impacting your business’ available capital, financing enables businesses to retain their capital. When you finance technology with an FMV lease (Fair Market Value Lease), for example, your monthly payments at the end of the term of the lease total less than the cost of the equipment in use. What’s more, when the lease is over, you can upgrade to the most up-to-date technology available for little to no added cost by renewing your lease agreement. With this type of financing agreement, you can count on a consistent monthly payment for the use of the best technology available, without having to worry about the disposal/resale of obsolete technology. When companies finance technology, they can also factor immediate ROI by measuring monthly payments for the technology in use by the amount of profit gained through its utilization.
By financing technology, you can factor the monthly payments as an operational expense instead of a capital expense. As such, IT purchases made through finance agreements are subject to tax benefits – including tax breaks in many cases.
Financing technology for your business, and factoring the monthly payments as an operating expense, in much the same way you would your water, power, and electricity, is more than just convenient – it’s promoting better business practices.
Interested in learning more about how shifting your business’ perspective on acquiring technology can save your company time and money while enjoying the latest technology available? Reach out to us today by clicking here!