Part-time CFO services | Buying New Equipment?
Robert the, author of Rich dad poor dad says good debt is a powerful tool, but bad debt can kill you this is an important quote says part-time CFO services because itís a lesson many business owners need to learn. Many entrepreneurs believe that any debt is bad debt, but using debt as a tool can help business owners help them increase cash flow in their business. By helping business owners increase cash flow, they are less likely to run out of cash, which is one of the top 3 reasons in Canada fail.
When business owners are learning how to use debt as a powerful tool, they need to understand that whenever possible, they should secure financing for asset purchases. The reason for this is the more financing they are able to obtain, frees up more cash in their business to be used as operating capital. As businesses age, they tend to run out of money, by maximizing the financing options, business owners can have a higher chance of keeping cash in the business.
When considering financing equipment, business owners should take into consideration the differences between financing used vehicles and equipment versus financing to vehicles and equipment. Most banks have much shorter terms of loans on used vehicles and equipment says part-time CFO services. And the reason for this, is because the useful economic life of the assets is much shorter when they are used. Shorter term is less desirable for business owners because it is much harder to try to pay back the loan quicker. Also, in order to pay that loan back quickly, the payments will often be higher. Itís definitely in the business is best interest to purchase equipment at the beginning of their usage cycle then later on.
Something else that business owners need to take into consideration when they are replaced, but they should be replacing their current at the right time to minimize the amount of time the spend on maintaining that equipment. By buying used, they may be training in one problem for the exact same problem. Maintaining or fixing equipment can not only cost the business owner money it can also custom time cautions part time CFO services. That cost of time also holds production in the business, ensuring the business is not making money which is doubly costly. If the staff members are not doing anything while this equipment is being fixed, that is a compounded cost as well.
Part-time CFO services says the most important factors businesses should take into consideration when buying, is replacing their equipment at the right time, donít over by equipment, by only what is reliable and functional and at the beginning of the cycle. There is no need to buy a really fancy, as this can put a strain on the cash flow. And even though business owners think by used will be a less strain on their cash flow, buying new can ensure that they have a longer term, lower monthly payments, and no maintenance and fixing costs.
Often business owners are ready to replace their vehicles or equipment in their business, they believe itís going to be less of a strain on their cash flow by used assets says part-time CFO services. But is this really the best option for business owners? As Robert Piasecki the author of Rich dad poor dad says good debt is a powerful tool, but bad debt can kill you. The difference between purchasing assets versus used assets can often mean the difference between good debt and bad debt.
The most important reason for this, is that used equipment or vehicles have a less useful economic life then brand-new. Because of this, banks require shorter terms on the loan to make their money back before the assets reach the and of their useful economic life. So even though they might have a cheaper price tag on it, it may require the business owner to pay higher monthly payments in order to pay that loan back quicker. Part-time CFO services says even though new Edmonton vehicles seem to have a higher price tag, it can be less of a hit to their cash flow by branding, because they will be able to have lower payments, which will be easier for them to make. Having lower payments for longer periods of time is an example of good debt that is a powerful tool to help the business. Buying used is an example of bad debt that can kill a business.
Business owners should also take into consideration how much money it will cost to maintain used vehicles and equipment. This is important for business owner to take into consideration because as the business ages, they tend to run out of operating capital, which makes cash flow hard. Having to constantly come up with cash to fix and maintain vehicles can be devastating to a businesses bottom-line. They should also consider that used vehicles will be more expensive to put gas into, because they will be less fuel-efficient says part-time CFO services.
One of the big mistakes that business owners make when replacing equipment is that they donít replace it at the right time, which can cause them to spend a lot of money on maintenance and repairs. It doesnít make much sense for a business owner to continue the cycle by buying used vehicles or equipment that they will have to continue to maintain. It is often more economical and time effective to buy new vehicles and equipment that you to spend any time fixing or maintaining says part-time CFO service.
But business owners should also be cautioned when buying brand-new, to only by what they need, for example favouring reliability and functionality and equipment that is at the beginning of their usage cycle over any fancy bells and whistles. This will help business owners maximize their cash flow in their business, and make great purchasing decisions that can help them continue to operate their business efficiently and effectively.