In this article Jorgen Josefsson, Managing Director at Scandinavian Business Seating UK, looks at the pros and cons of leasing.
Leasing your office furniture and equipment could be a cost effective option as long as you are aware of both the advantages and disadvantages. Consider your office equipment needs, financial situation and your line of business when deciding whether to lease or not.
In the current economic climate many organisations are faced with budget cuts. Often companies do not have the capital available to buy the furniture and equipment outright; leasing allows you to spread the cost over two, three, four or five years, acquiring the solution that meets your needs rather than that which your budget dictates. It also allows you to carry out refurbishments straight away. Lease payments as well as interests are fixed for the period allowing you to budget for a monthly or quarterly payment and subsequently help you to forecast your cashflow.
You may not wish to tie up a crucial credit line with your bank for this type of project, and prefer to leave it open for future working capital. Using leasing allows you to achieve the project without compromising these lines of credit. The 100 percent allowance on payments makes leasing the most tax efficient method of refurbishing a building and can work out cheaper than paying cash.
Leasing allows you to acquire assets with minimal initial expenditure, however, even though the smaller payments will leave you with more cash, leasing office furniture is usually more expensive in the long run as you pay interest on the instalments.
Furthermore, leasing office equipment and furniture ties your business into a long-term agreement in which you are obliged to make monthly payments for the agreed lease period even if you don’t use the equipment anymore. It is therefore very important you think about your office furniture and equipment needs and also about the way your business is developing to avoid those early termination fees. Does your company relocate often? Do you need to keep up with the latest in design and technology developments? Is the equipment used often? Could you use your capital budget more effectively in other areas like R&D, marketing or staff?
If so, then leasing is a better option for you. It will help you keep your office current – you can often upgrade without the expense of buying newer models; just make sure the lease contract offers upgrades as they become available.
Nowadays, the right workspace and look – created decoration and furnishings – play an important role in attracting and retaining the right kind of staff. Innovative, creative spaces cannot be achieved by keeping the same equipment and furniture, therefore updating to fit needs for present and future demand is important. However, in this current climate businesses are cautious with any spending – it may be difficult to get the capital allocated for an office update. By leasing you can overcome your budget limitations and fit out your office with equipment and furniture that will reflect the wider organisational culture and management style.
Contrary to popular belief you are not limited to whatever items are in stock. You can can create a custom project, decide exactly what furniture and equipment you want (even custom build) and have it financed via leasing.
As well as staff retention you can also help to improve the wellbeing of your employees. The UK’s Chartered Society of Physiotherapy found that in the office environment, musculoskeletal disorders, including backache, are estimated to cost society and employers around £7.4 billion per year. The sedentary lifestyle has a lot to answer for with many people suffering from aches and pains related to being inactive.
This is where leasing could be a cost effective option – creating an ergonomic space with appropriate tools for a person to do their job well benefits not only the employers through productivity and reduced absenteeism but also the well-being of the individual, aiding concentration. Many companies might be surprised to find out that to lease for example a decent ergonomic office chair will cost them less than 50 pence per day. Consider the increase in performance brought by proper ergonomic tools and your return on investment is instant.
There is, of course, one obvious disadvantage when leasing furniture – you may never own the asset outright, although many leasing companies allow you to buy at the end of the agreement. Furthermore, you are responsible for maintaining it and insuring it.
When deciding whether to lease or buy, review your cash reserves, cash flow and credit lines. If you decide to lease, make sure you understand the terms and conditions of the lease – what happens at the end of the lease, are upgrades included, required insurance on the equipment as well as early cancellation fees. Factor in the possibility of the product becoming obsolete, or expiring before the lease does. Understanding exactly what your company’s needs are and what the purpose of the office equipment is will help you to make the right decision.
