Buying technology could be the cause of your business’s cash flow problems

Technology has the ability to put your business ahead of industry competition, increase productivity, improve staff performance, provide better cybersecurity, reach your customers more effectively, and realise your business goals sooner.

The opposite is also true. Due to slow or ineffective technology, the average employee loses approximately 46 minutes of productive worktime every day. That translates into 24 days’ work per year, per employee.

Revenue is also affected by outdated or slow technology. A UK-based study showed that 65% of SMEs attributed hardware failure for IT downtime, resulting in a loss of £7,235 per minute (Source: StorageCraft). In a South African context, that would be a staggering cost of over R170 000.

Balancing the budget
Understandably, IT is one of the major operating expenses for a business. Many business experts recommend that 6% – 7% of total business revenue is allocated to purchasing and upgrading technology hardware and software. This, however, can increase based on a business’s industry. Banks, for instance, spend over 10% of annual revenue on technology.

As a guideline for IT spend, the industry guidelines according to CIO magazine are:

  • 6.9% for small companies
  • 4.1% for mid-sized companies
  • 3.2% for large companies

If you are a South African SME and use these guidelines, you would have to set aside R690 000 per year of your R10 million annual revenue for technology.

Cash flow a challenge for SA businesses
The problem with theoretical recommendations such as these is that each business’s situation is unique. Combined with that is the fact that most of South Africa’s 2.6 million small-to-medium-sized businesses state ‘cash flow’ as their main challenge (Source: News24).

As the financial backbone of any business, it is very important for any company to safeguard its cash flow and avoid poor liquidity. One way to reduce cash flow risk is to reduce a business’s operating expenses. However, the challenge is to do this without reducing its profit, customer satisfaction, or productivity.

This is where asset finance solutions become a lifesaver.

Instead of purchasing all the technology your business needs, you rent your IT equipment. With an asset rental agreement such as this, you immediately free up your cash flow while still benefitting from the latest technology. In addition, the responsibility of repairs, upgrades, and asset disposals also become a problem of the past, further decreasing cash flow risk.

IT financing increasing

More and more South African SMEs are realising the immense value of renting instead of purchasing assets. IT has always been a depreciating asset – not an investment. With today’s constant technology advancements, businesses are struggling to keep up to date while maintaining a healthy cash flow.

Apart from access to the latest technology, IT rentals benefit businesses by:

  • Allowing cash to be geared towards growth;
  • Enabling cost scheduling;
  • Maximising purchasing power; and
  • Contributes to budget certainty.

Real-time asset data management

Apart from the competitive short-term rental solutions in IT, customers also benefit from the unique RentWorks Enterprise Asset Management (REAM) portal. With a fully customisable dashboard, customers can use this secure web portal interface to access live, real-time data about their assets.

This allows them to monitor asset classes, when contracts expire, the date rentals are due, etc. Essentially, the system gives customers the power and insight to proactively manage risk and their refresh cycles more efficiently to avoid end-of-term hassles.

What’s more is the cybersecurity features, which gives customers the option to remotely secure computer user data by freezing or wiping data from the rented device.

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