Computing is excellent for business. It saves time and therefore money, and should make people more productive and, in turn, lead to an increased income. Network your systems together and it gets even better; put in a fast internet connection, plus a few redundant systems (so that you still have your data when the first systems fall over), and you should be doing very nicely.
Except, of course, you've got to be able to afford all this in the first place. Not every small business has a great deal of up-front cash to throw at technology beyond the basics you put into the business plan to start you off. The good news is that there is help available. It's worth getting two things straight, though: first, if your need is for basic computing equipment, it's not going to be expensive; second, if your business doesn't make enough money to cover the costs of such equipment, there may be a problem with the business itself rather than with cash flow.
So, you're sure you don't have a business problem but you want to explore the different options for buying technology. The rst is simple - go and buy what you need if you have enough cash. If you have nearly enough cash but want to save money for next year or the year after as a contingency plan, read the box on tax breaks opposite; you might nd the tax relief you get on the equipment you need will actually bring the price you actually pay down to an acceptable level, particularly when you take off the VAT you'll almost certainly be getting back at the end of the quarter.
Buying outright is only one option; leasing and renting are the others. Neither has a long history of take-up from the small business sector. Dan Homolka, business solutions director of Hamilton Rentals, says: 'They've tended to say things like 'great but it's not for us'." Part of the reason for this is undoubtedly the rigour with which leasing and rental companies check the financial credentials of those to whom they will be renting their equipment. Start-up companies in particular won't have a trading record with which they can impress.
The other reason can be cost. "I often get people saying, hang on, if I pay rent for this, I end up paying more than if I bought it outright," says Homolka. "I say yes, why is that a surprise?"
The fact is that renting is never a cheap option in any field outside the property market. If you hired a car on a permanent basis you'd expect to pay a lot more than if you were buying. This doesn't mean renting is a waste of time, but it means it's better suited to people with short-term computing requirements, or people who want their maintenance and upgrades handled by someone else. Both would be included in a rental agreement and the flexibility is as complete as it gets.
The leasing option is often seen as a fair compromise between the two. The disadvantages are simple: you pay money over a period of time which will add up to either as much as or more than the computer is worth. At the end of the period the computer isn't yours. On the other hand, given the speed at which IT depreciates, it is probably worth very little to the leasing company either. Like rentals, it attracts 100% tax allowances, so the money actually going out of the business is less than might be imagined at first.
The real advantage, once again, is in the services that get provided with the lease. "The last thing most small businesses want is the distraction of having to manage their network or other equipment," says George Acris, marketing manager of Micro Lease. "By leasing equipment someone gets the benefit of having it without having to worry about maintenance."
This sort of advantage has started to multiply recently with the introduction of ASPs (application service providers), which effectively rent software to customers, who dial in through a basic computer to a host system on the ASP's site. The advantage to the ASP is that it does not have its equipment in a client's building, so there is no risk of losing it, and the client needs only the simplest of computers to get going. What the client doesn't need is any technical skill to speak of. Sara Gemmell, director of business marketing at service provider Nextra, says: "The thing about a managed service is that people get to outsource their entire IT infrastructure." This gives flexibility and eliminates the need for a dedicated IT person, which most smaller traders won't have anyway.
Ultimately, if someone tells you they're going to give you a technical infrastructure for your business for nothing, they're probably lying or at least deeply eccentric. But there are ways of structuring the finance and bringing the costs down, so that the money that leaves a business needn't be as frightening as it first appeared.
Until the last couple of budgets there was a lot to be said in favour of leasing or renting as opposed to buying computer equipment outright. The reason was that a lease or rental would attract a 100% tax allowance whereas the tax relief on IT equipment had to be spread over three years. Given the speed at which equipment goes out of date, this was never a realistic approach.
The position has now altered so that buyers get all the tax relief in the first year. Regardless of the claims of the rental and leasing companies, there isn't, therefore, much difference between any of the options purely from the tax point of view. The exception is in cases where the payments might be irregular, for example if a leasing company asked for a large payment or several first and allowed smaller payments later. In this instance you would still get tax relief as if it were being paid steadily in identical amounts.
Your dreams of how your business could improve with better use of IT will remain dreams unless you nd some more money. If a sudden increase in sales doesn't seem imminent, there are ways of bringing in some more cash.
