Operational and product innovation are two keys for manufacturers to remain competitive.
For small business, this focus must be even sharper.
Last month we looked at the operational side, at internally optimising your processes and equipment, and we saw how optimising your cost and efficiency improves your bottom line. Late last year we also looked at why you shouldn’t wait until your equipment breaks down to replace it.
Having reliable coding and labelling equipment that doesn’t cause downtime (read “losing profits”) is a vital contributor to smooth operations.
But what if your technology does need replacing and you don’t have the capital funds to do it? Your options are:
- Buy something cheaper (that may not suit your purposes)
- Pay for it via a director’s loan (not always practical or doable)
- Limp along
The 4th option is to lease it.
Leasing not only reduces the cap-ex on coding equipment, it gives you up-to-date technology — with all the benefits that brings: greater automation, good integrateability, greater efficiency, increased productivity, no shortage of spare parts and consumables, more compact units, increased ease of use … and so on. And gives the option to upgrade to the latest and greatest at the end of the lease term.
It also means you can take advantage of advances in process automation or coding and labelling equipment that links in to other business areas or other equipment — such as vision or weighing technology — thus increasing your overall “business intelligence”. And with small businesses increasingly looking at exporting to Asia — particularly China and India — they need to gear up to export (and not just with coding and labelling equipment).
Leasing is particularly useful to small business (and larger ones) if you need to update several pieces of product ID equipment at once.
While some business owners have a preference to buy, leasing gives added options to those with restricted cash flow to put into buying the right assets for their business. In a highly competitive market it’s important to keep costs low, but it’s also important to know which ones to prune. Replacing the pictures on the walls is probably not necessary — nice as it would be — but cutting back spending on capital equipment that contributes to product output, or improves your operational efficiency, is not the way to stay competitive.
An added bonus is that leasing is a fixed cost, with a known outcome.
Matthews partners with Macquarie for leasing (because of its solid reputation), and in some cases we can bundle integration software in with product ID equipment.
There are two ways to lease:
- operating lease (can also be known as rental): whereby at the end of the lease term, you can continue leasing casually, set another fixed term, have the option to buy the equipment at fair market value or return the equipment.
- finance lease: at the end of the lease term, you can the continue leasing casually, or buy the equipment for a small residual value.
Each has different tax and finance implications, so choose the option that best fits your business’s needs (after you talk with your accountant).
And if you’re interested in all-round innovation, here’s some interesting reading.
To talk through leasing options, contact us today.