Opinion Article - Device Leasing Advice
Top tips when renting a multi-function device for your business
By Marc Pillay, MD of DEVELOP SOUTH AFRICA
A multi-function device (MFD) is an office machine which incorporates the functionalities of multiple devices into one, so as to have a smaller footprint in a home or small business setting or to provide centralised document management, distribution and production in a large-office setting. A typical MFD offers a combination of (some or all) printing, copying, scanning and faxing.
Renting an MFD is one way for you to avoid the initial capital outlay required for outright purchase. Whilst the overall outlay is slightly higher over time for a rental agreement, as compared to an outright purchase, there are sound reasons to consider this approach as a method of finance for office equipment.
Renting is a well-established and tax efficient form of finance, which, when structured correctly, can also enable cost-effective trade-up access to the very latest technology at the right time.
A rental agreement is a contract between a finance company and a customer, giving the customer use of the equipment over a period of time – usually 36 months. In alignment with this, smaller payments are made regularly, on a month-to-month basis, instead of a larger capital outlay.
The ownership of the device remains with the finance provider, which means that the equipment does not show on your company’s balance sheet and therefore depreciation is not applied.
MFD renting is the most popular choice for small businesses that need a mid-to-high volume photocopier or printer, just as large organisations prefer to keep tighter control on their finances and enjoy the tax efficiency and upgrade opportunities of a rental agreement over purchasing.
For many businesses, the outright purchase of this important office device may be a daunting investment, mainly due to the associated large upfront sum, but also the prospect of it becoming obsolete in three years’ time. Renting a device may prove to be the smarter alternative with numerous good business-sense advantages:
· Budgeting: Many businesses earn revenue over time, so to “pay as you use” makes sense: Why pay out one lump sum when, with renting, you can make smaller, more manageable payments in an agreement that is suited to your current needs.
· Tax efficiency: Renting can reduce your overall tax bill, as the cost is deductible as an operational cost, thus reducing the net cost of renting the equipment.
· Upgrading technology: It is well understood that an MFD is not a business asset that appreciates, in fact IT assets depreciate faster than the vast majority of other purchased assets. Renting can give you more freedom to upgrade to the latest technology. By contrast, a business that owns its office equipment can only upgrade by reinvesting and disposing of the existing asset.
· Capital: It makes sense to use capital for business expansion or appreciating business purchases. Renting your office technology preserves precious resources for these purposes and other business opportunities.
My top tips for MFD rental
Analyse it: Your solution provider needs to do a full audit of your business’ requirements, covering everything from usage and users to network peaks and troughs. A 20 percent growth allowance should also be taken into account, given the rental period is usually three years.
Test drive it: When deciding between two or three copier models, ask for a demonstration of how the machines work. Or if it is more a case of colour print quality, ask the sales representative to forward you copies or prints of your own document files to ensure satisfaction in advance.
When not to: If your output is low, you probably do not need to rent a "business" MFD. You might be better off purchasing a smaller desktop MFD or laser printer that would cost much less overall - unless you want the advanced features of a business MFD or printer.
Crunch the numbers: Ask your accountant to run the numbers for you to determine which is the best option for your business – outright purchase or rental?
Structure favourably: If you decide that a rental agreement is right for your business, be sure that the agreement is structured in your favour. Things to check include:
· The ability to upgrade the equipment before the end of the rental period - your business may grow exponentially over the period, or new technology or legislation may come into play that may demand a device upgrade.
· Conversely, you need to ensure that the device can also be downgraded.
· The terms of cancellation – 30 days is standard and fair, after the initial rental term.
· Ensure there is no early settlement or cancellation penalty after the rental term expires.
· Most rental agreements are over 36 months. Demand a fixed/ linked monthly rate, with zero percent escalations, and no residual.
ABOUT DEVELOP SOUTH AFRICA:
DEVELOP South Africa, is a wholly owned subsidiary of the Bidvest Group Limited. DEVELOP is one of the leading international brands, with an operational stance of consultative business partnering. The company assesses, designs and guides throughout the implementation process and beyond, offering continued onsite technical and software management as well as the supply of spare parts and consumables. Its primary objective is increasing productivity in the customer’s business environment. With “dynamic balance”, DEVELOP South Africa offers clients cost effective innovation in the product area, the readiness and ability to flexibly respond to the requirements of the market and customers, and unrestricted customer satisfaction; whilst being dedicated to a fair relationship with their business partners
DEVELOP SA: Casey Steyn, (011) 661-9191, firstname.lastname@example.org, www.developsa.com
icomm: Debbie Sielemann, +27 (0) 82 414 4633, email@example.com, www.icomm-pr.co.za