Part-time CFO Services | Why Buy New Equipment?
The author of Rich dad poor dad, Robert Kiyosaki says good debt is a powerful tool, but bad debt can kill you, these are powerful words says part-time CFO services. Business owners should be aware of how to use debt as a tool rather than thinking all that is bad. By making good financing decisions, business owners can maximize the cash flow in their business, and avoid running out of money at crucial times.
Business owners need to ask why they should plan on financing equipment purchases rather than financing operating capital says part-time CFO services. The reason for this is because it is much more possible to get financing for assets been operating capital. There are much more options available for business owners to finance their asset purchases and they are easier to qualify for. So why should business owners finance purchases at all, if they have the money in their business to purchase new assets? The reason for this, is so business owners can keep all of the cash that they have in their business to use as operating capital. As businesses operate, there is a greater possibility of running into a cash crunch, so the more cash they can keep in their business the better.
When business owners are ready to purchase hard assets in their business whether itís equipment or vehicles, they may believe that it is a better use of money to purchase used so they can save their funds. Part-time CFO services says this is not usually a great strategy because terms for used equipment or vehicles are much shorter than the terms for brand-new. The reason for this is banks take into consideration the useful economic life of that equipment, and require the money to be paid back to them before they reach the end of the useful life. Since used vehicles and equipment have a shorter lifespan once theyíve been purchased, the terms will be much shorter.
In addition to shorter terms, businesses also should be aware that the monthly payments they will be paid, are going to be higher per month says part-time CFO service. When financing, businesses should aim to have the longest terms possible and the lowest monthly payments in order to minimize the hits to their cash flow. By purchasing used vehicles and equipment for the business, business owners are not tapping into that possibility.
In order for businesses to use debt as a tool, they need to be very thoughtful when making their decisions, by utilizing financing, and making the best decisions that will give them the lowest payments for as long as possible, they can minimize the hit to their cash flow to avoid running out of money says part time CFO services. For these reasons, business owners should consider buying new equipment and vehicles when theyíre ready to make a purchase, instead of used. This way, they get great equipment, and minimize the effect on their bottom line.
50% of all businesses close the door their business within five years, says part-time CFO. And out of those businesses, percent of the say that running out of cash to their failure. Business owners need to learn how to make great purchasing decisions, by utilizing financing order to maximize the cash flow in their business, as well as purchasing the right equipment at the right time. By figuring out all of these variables, business owners can make great decisions on what to purchase for their business, so they can equipment to help them for their business while minimizing the effect to their cash flow.
One of the biggest decisions a business owner has their business when they are deciding what equipment and vehicles to buy in their business is if they should buy new or used says part-time CFO services. They should determine what is most economical for their business, not only just for the price take, but if itís possible to be financed, and what those terms are as well as if the vehicles and equipment maintenance. Financing is equipped, business owners need to know that the terms are often much shorter for used vehicles and equipment than for brand-new ones. Banks figure out the length of term by calculating with the economical life of that equipment is, and making sure that the loan is paid back before the end of it. Since used equipment has a shorter useful lifespan, the term will be shorter as well. Much shorter, business owners paired to pay back higher monthly payment, which can be very hard for businesses to do. The more cash businesses have to fail, they basis to pay back the loan, the higher the potential is forwarding into a cash flow problem.
Business owners should also do some research says part-time CFO services, to find out if there is additional maintenance required the used equipment or vehicles their purchasing. Usually the reason why previous owners getting rid of the vehicles or equipment is because they were starting to cost more money to run maintain, so business owners need to be aware of that before they make the decision to purchase. Factoring in the increased cost for operating and maintenance, make to this scale in favour by brand-new equipment instead says part-time CFO services.
Some of the mistakes that business owners make when they are purchasing brand-new equipment, is that they by fancier if equipment is absolutely necessary. Part-time CFO service recommends that business owners figure out exactly what they need, and by reliable, functional vehicles and equipment that are at the beginning of their usage cycle. It may be tempting for business owners to purchase equipment or vehicles with all the bells and whistles, but if they can avoid that temptation, the bottom line will thank them. The following these rules smart purchasing decisions and great financing options, business owners can avoid the biggest problem that plagues most business owners these days.