Business assets age over time and it’s not uncommon for businesses to update a few items or more every year. Here’s why you might be looking to update and how you could finance your asset upgrades.
When Should You Update?
You should figure out whether it’s the right time to update for you, whether your business is leasing a car or a new fleet or updating its IT infrastructure. Factors that can influence your decision include:
- Technological obsolescence. Technological obsolescence is a good reason to look at updating certain types of assets. These could be computer or IT systems, machinery, or other tech-related items.
- Expiry of lease agreement. If you have been using assets under a lease agreement or a hire-purchase arrangement, you might find that it’s easier and more cost-effective to update than to retain the old assets.
- Faults or damage. Faults or damage to your old assets might have rendered them unusable.
- Efficiency and expansion. You might need to update your processes and operations for better efficiency and to support larger staff and customer numbers as your business expands.
Benefits of Updating
Updating equipment can lead to better efficiency in your business. Other reasons to update might include the following.
- Tax. Tax breaks can apply to certain types of upgrades. This can make it advantageous for your business to upgrade.
- Competitiveness. You may need to upgrade to ensure that your business is keeping up with your competitors in the field of technology.
- Product and service quality. Updating equipment can be vital for maintaining or improving product and service quality.
Assets to Update
Almost anything you use in your business can be updated. This includes your business premises, IT system, operations system, and machinery and plant equipment.
While moving your premises can be a major task, sometimes it’s critical for your expansion plans. You might purchase a new factory or office premises, or you might move to another leased location. Your business premises need to meet basic staffing and operations requirements, and possibly provide you with marketing benefits such as visibility from the road.
Your IT infrastructure probably needs to be reviewed at least once every five years. With the rapid inroads being made in the areas of technology and software, businesses may need to keep up with competitors by updating relatively frequently.
Processes and Operations
Processes and operations can involve equipment, hardware, software, and systems but it may also cover less tangible elements such as know-how and processes.
Machinery and Plant Equipment
Machinery and plant equipment tend to last longer than computer systems, but from time to time they may need to be updated if the machinery becomes worn or damaged.
If you have a mobile staff team, you may need to update your company fleet on a relatively frequent basis.
Office furniture can last for decades, but businesses that receive customers on site might update their furniture more often.
Financing Your Update
There are many ways you could finance your update. Depending on the cash flow position of your business, you might decide to finance it from your profits. Alternatively, you might take out a loan to fund your update. You can use an investment loan calculator to work out the required payments, loan duration, and the total cost of the loan.
Hire-purchase and leasing is another popular way to fund updates for business equipment and furniture. Whatever it is you’re looking to update, you’ll want to make sure that your financing arrangements are suitable for your upgrade plans as well as the broader strategy of your business.