Rents or operating leases, as they say, are outdated in South Africa. For too long, we have insisted on the mentality that "I want to possess everything" to become a most business-minded way of thinking where ownership is not always a clever move when it comes to IT's IT infrastructures.
We live in an age where information and assimilation and interpretation have become paramount. Hardware, however, was in the state of the goods. This is what we use and we're gonna stomach it.
The question now raises the question: Why would you want to attribute a utility that does not have anything to do with capital when you start using it?
For the following seven reasons, we can gain some insight into how rents have become the acquisition of IT hardware infrastructure in corporate South Africa.
first Lowest Access Cost Option
Renting is a more cost-effective solution than paying for cash, as it does not need to be deposited for the first purchase.
In most cases, rent for a particular product should be purchased only on the 15th of the month and the end of the following month at the end of the same month if the purchase is made after the 15th day. This would mean further leverage.
For small and medium businesses, this is the ideal way to create an infrastructure without clearing the company's bank account.
2nd Improved cash flow management
Hiring has the following benefits over cash flow:
o Keeps Cash
o Ensures Budget Security for Fixed and Regular Payments
o Device Only
Also Enables make cash available to evaluate your assets and use cash to acquire assets for depreciation.
Renting also allows for capital investment profitable efforts that are synchronized with the organization's core business strategy. This is usually referred to as the casual cost of capital.
3rd Obsolete cover
Rapid technological obsolescence imposes a burden on Hi-Tech equipment owners. By lease agreement, the end-user may renew the equipment at any time.
Enables greater efficiency within the organization and enhances productivity with the latest IT tools.
Usually, after expiry of the term of the contract, the assets may be returned to the lessor without the obligation to resume the lease. The landlord will arrange for the disposal. However, various technology upgrade options ensure that the latest technologies are available for business use without interrupting operations.
4th Flexibility and Upgrading
Most lease agreements allow you to easily upload and update equipment leases, while at the same time leasing costs.
Basically, this means that you are upgrading your existing equipment, paying a settlement, and purchasing the new unit.
With the rental model, you can choose flexibility to shorten or extend your rental rates by choosing options for expiration options, as well as choosing options for financing options.
5th After Net Net Present Value of Cost
With reliably high inflation, the costs associated with deferral of costs are reduced in the present value cost after the inflation cost calculation.
6th Balancing Financing
Structured rental contracts in accounting law are not activated in the balance sheet, thereby improving liquidity, profitability and solvency ratios.
Traditional financial leasing and asset purchase instruments are included in the balance sheet as financial debt. Operating leases, however, can be deployed as operating costs, enabling minimal cash outflow and forecasting.
7th Income tax benefits
Rents are an operating expense and are fully deducted.
So the next time the company needs to upgrade its IT infrastructure, take care of an operational lease!